as possible, which would help the economy recover as quickly as possible. that is why in the days following the attacks, we took the extraordinary step of lowering interest rates outside our fixed announcement dates. it then became clear that the economy would continue to operate below its capacity throughout 2002, with resulting downward pressure on inflation. so we sped up the pace of interest rate reduction at the next two fixed announcement dates. we wanted to support economic growth, which would help keep inflation within our target range of 1 to 3 per cent. the terrorist attacks created all sorts of uncertainties — economic, political, and military. so it was extraordinarily difficult last fall to be very certain about the future track of the economy. now however, a clearer picture is beginning to emerge. the current economic situation and outlook one way for us to get that clearer picture is to actually get out across the country to see what is going on in canada's regions. these opportunities to get away from the frenetic world of financial markets, and to see what is happening in the real economy, are extremely important to me, and to the bank. let me focus on this province for a moment. here in saskatchewan, the impact of a slowing world economy was felt mainly through a weakening in commodity prices. this hurt not just the agricultural sector, but the important mining sector as well. after posting very modest growth in 2001, saskatchewan's economy is expected to show an improvement this year. a pickup in the global economy should boost commodity prices, which would be a big help to the province. saskatchewan's agricultural sector would also be helped by a return to more normal weather patterns. there is an old farming saying that you can't lose a crop in january. but there is a clear critical need for more moisture in the soil and we all hope it comes soon. of course my predecessor, gordon thiessen, has strong roots in this province and he understood well the difficulties faced by farmers year in and year out. but i want you to know that i too can relate to the trials of farming. i have a small cow - calf operation outside ottawa, and i know how difficult this business can be. we can try to do something about the economy at the bank of canada, but sadly, we can't do anything about the weather. one clear positive for saskatchewan has been the fiscal record of the provincial government, which is currently projected to post an eighth consecutive surplus. this strong fiscal record can only

david dodge : bank of canada ’ s outlook for the canadian economy remarks by mr david dodge, governor of the bank of canada, for a meeting with canadian banks and the investment community, new york, 31 january 2002. * * * i am pleased to be here today and to have this opportunity to talk about the bank of canada's outlook for the canadian economy and to update you on our monetary policy actions. this has been a very difficult year for all of us in north america, but especially for you here in new york city. the tremendous loss of human lives as a result of the 11 september terrorist attacks has been tragic. among those who died there were family members, friends, and colleagues. and there were other innocent citizens of many nationalities caught in this tragedy, including canadians. all of us at the bank of canada share a deep sorrow and extend our heartfelt sympathy. the immediate impact and the fallout from last september's events introduced new layers of uncertainty into the economic picture, compounding the effects of a deepening global economic slowdown that had become more evident during the summer. the bank of canada quickly responded to this extreme uncertainty by aggressively lowering interest rates in order to minimize the economic impact of the attacks and limit the loss of confidence. since september, we have lowered our key policy interest rate by 200 basis points, bringing the total reduction since the beginning of 2001 to 375 basis points. this substantial monetary easing, together with measures taken by canadian governments to reduce taxes and to strengthen national security, should support growth in domestic spending. on this basis, and with the improvement we have seen since the fall in the geopolitical climate and in consumer confidence, it is now clearer that the canadian economy will gather momentum as the year unfolds. the timing and strength of the recovery will partly depend on how quickly business confidence and business investment, which remain weak in many countries, bounce back. here, it is important to note that in canada we did not have the same degree of overinvestment in fixed capital in the manufacturing sector during 1998 - 2000 as in the united states. so, the need for retrenchment and for adjustment of excess capacity in canada would be less. the bank of canada's current view is that economic growth in canada will be relatively modest in the first half of 2002 — between 1 and 2 per cent, on an annualized basis — but that it will accelerate in the second half — to a range of 3 to 4 per cent —