in moderating demand to better align with supply. we are committed to doing that job. the second lesson is that the public's expectations about future inflation can play an important role in setting the path of inflation over time. today, by many measures, longer - term inflation expectations appear to remain well anchored. that is broadly true of surveys of households, businesses, and forecasters, and of market - based measures as well. but that is not grounds for complacency, with inflation having run well above our goal for some time. if the public expects that inflation will remain low and stable over time, then, absent major shocks, it likely will. unfortunately, the same is true of expectations of high and volatile inflation. during the 1970s, as inflation climbed, the anticipation of high inflation became entrenched in the economic decisionmaking of households and businesses. the more inflation rose, the more people came to expect it to remain high, and they built that belief into wage and pricing decisions. as former chairman paul volcker put it at the height of the great inflation in 1979, " inflation feeds in part on itself, so part of the job of returning to a more stable and more productive economy must be to break the grip of inflationary expectations. " 2 one useful insight into how actual inflation may affect expectations about its future path is based in the concept of " rational inattention. " 3 when inflation is persistently high, households and businesses must pay close attention and incorporate inflation into their economic decisions. when inflation is low and stable, they are freer to focus their attention elsewhere. former chairman alan greenspan put it this way : " for all practical purposes, price stability means that expected changes in the average price level are small enough and gradual enough that they do not materially enter business and household financial decisions. " 4 of course, inflation has just about everyone's attention right now, which highlights a particular risk today : the longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation will become entrenched. that brings me to the third lesson, which is that we must keep at it until the job is done. history shows that the employment costs of bringing down inflation are likely to increase with delay, as high inflation becomes more entrenched in wage and price setting. the successful volcker disinflation in the early 1980s followed multiple failed attempts to lower inflation over the previous 15 years. a lengthy period of very restrictive

through our regular monetary policy reports and updates to those reports. we do this through press releases on fixed announcement dates for interest rate decisions, eight times a year. and we do this through public speaking engagements with audiences across the country. our methods of communication also continue to change. today, we use more tools and more technologies to reach canadians and explain our work. for example, the audio portion of this speech is being broadcast live on the internet. and we have just completed a redevelopment of the bank's website. since its creation in 1995, our website has been central to our efforts to conduct the bank's business in an open and transparent manner. the site is visited over 180, 000 times a week. in 2003, it was named " central bank website of the year " by central banking publications in the united kingdom. we wanted to make the site even better, and so on monday we launched a new version. it features an attractive graphic redesign, improved navigation, and a lot of new content. i encourage you to visit our new site, and we welcome your comments. changes in the global economy so that's a quick look at some of the ways that the bank has changed in 70 years. i'll spend the remainder of my time today discussing some of the major changes afoot in the global economy and how the canadian economy is adjusting to these developments. i've just returned to canada from meetings with central bankers in china and japan. i have also attended meetings in switzerland, the united states, and morocco over the past month. and in two weeks, i will head to the united kingdom. in these countries, and in almost every other nation, people are being affected by the same powerful forces - growing competition from emerging - market economies, such as china and india, and large and growing financial imbalances in the united states and asia. the growth of emerging - market economies has driven up demand for commodities, and that has pushed up the world prices for oil and many other commodities that we produce in canada. meanwhile, the more competitive world environment and productivity improvements in some countries are lowering the prices for a number of consumer goods, communications services, and computer equipment. all of these forces are causing significant exchange rate movements, including a sharp appreciation of the canadian dollar against the u. s. dollar over the past couple of years. higher prices for many commodities produced in canada means that our terms of trade - that is, the ratio of the prices that canadians receive for