telecommunications, where world production has been running ahead of demand. these three high - profile sectors naturally attract a lot of attention, especially in parts of canada with a heavy concentration in such industries. weakness also continues in sectors that produce non - energy commodities. but we must keep a sense of perspective. there is still considerable strength in other important areas of our economy. the latest data show that investments in the energy sector are very strong. and, except for autos, retail sales are solid. in addition, activity in housing, non - residential construction, and most other service industries remains firm. when we weighed all of the evidence in early march, we concluded that there was, in the near term, room for more monetary stimulus without risking pressures on capacity and inflation. on 6 march, we cut the bank rate by another 50 basis points, bringing the total reduction since january to 75 basis points. these lower domestic interest rates and rising disposable incomes, aided by recent tax cuts, should help to support the growth of domestic demand in canada in the second half of 2001. this additional stimulus to economic activity is consistent with keeping the core rate of inflation in canada close to the 2 per cent midpoint of the inflation - control target range. we see total cpi inflation moving down to about 2 per cent in the second half of 2001, if world oil prices remain around current levels. all in all, as we look ahead through this year and into 2002, the bank remains positive about canada's economic prospects. the recent volatility in exchange rates, both here in canada and in many other countries, has generated considerable public commentary, and i would like to say a word about that. what we have been seeing is a strengthening of the u. s. dollar against all major currencies despite the marked slowdown in u. s. economic growth. since the exchange rate is a key price in the canadian economy, the bank recognizes that movements in its value can be a source of concern for canadians. i want to reassure you that the bank watches market developments closely and carefully assesses the effects of currency movements on aggregate demand and inflation in canada. in closing, mr. chairman, let me emphasize two points. first, although we expect reasonable growth to resume in the second half of the year, there are risks and uncertainties attached to this projection. these risks stem from global and, especially, u. s. developments. although a moderation of u. s. demand was needed

to sustain non - inflationary growth over the medium term, the slowing has been more abrupt than anticipated. as we look ahead, the question is how quickly will the necessary adjustments in production and inventories be completed in north america. my second point is that canada's economic fundamentals are sound — in fact, they are the best they have been in nearly 30 years. canada continues to benefit from a climate of low, stable, and predictable inflation. canadian governments are running budgetary surpluses. canada is running a record trade surplus. federal and provincial governments are reducing their public debts. canada is reducing its net foreign indebtedness. and there has been a surge in investment in equipment and technology that is essential for rising productivity and improved standards of living. canada's strong fundamentals should operate in favour of the canadian dollar over time. moreover, corporate balance sheets are strong, financial institutions are sound, and credit markets are functioning well. although consumer debt loads have increased, with rising incomes and lower interest rates households are in a better position to service those debts. in sum, mr. chairman, i believe that canada is well placed to weather this period of economic adjustment. given the uncertainties, however, the bank will continue to monitor developments closely with a view to maintaining the low inflation that helps our economy to achieve its full potential.