tiff macklem : release of the monetary policy report opening statement by mr tiff macklem, governor of the bank of canada, at the press conference following the monetary policy decision, ottawa, ontario, 24 july 2024. * * * good morning. i'm pleased to be here with senior deputy governor carolyn rogers to discuss the july monetary policy report ( mpr ) and today's policy announcement. today, we lowered our policy interest rate a further 25 basis points to 4. 5 %. this decision reflects three key considerations. first, monetary policy is working to ease broad price pressures. second, with the economy in excess supply and slack in the labour market, the economy has more room to grow without creating inflationary pressures. third, as inflation gets closer to the 2 % target, the risk that inflation comes in higher than expected has to be increasingly balanced against the risk that the economy and inflation could be weaker than expected. looking ahead, we expect inflation to moderate further, though progress over the next year will likely be uneven. this forecast reflects the opposing forces affecting inflation. the overall weakness in the economy is pulling inflation down. at the same time, price pressures in shelter and some other services are holding inflation up. we are increasingly confident that the ingredients to bring inflation back to target are in place. but the push - pull of these opposing forces means the decline in inflation will likely be gradual, and there could be setbacks along the way. if inflation continues to ease broadly in line with our forecast, it is reasonable to expect further cuts in our policy interest rate. the timing will depend on how we see these opposing forces playing out. in other words, we will be taking our monetary policy decisions one at a time. let me highlight some of the economic dynamics covered more fully in the mpr. economic growth in canada has picked up but remains weak relative to population growth. household spending has been soft. pent - up demand for things like new cars and travel is fading. and many families are setting aside more of their income for debt payments, leaving less money for discretionary spending. in the labour market, employment has continued to grow more slowly than the labour force. job seekers are now taking longer to find work, and the unemployment rate has risen to 6. 4 %. the job vacancy rate has come down significantly, and reports of labour shortages are now below normal. overall, indicators suggest some slack in the labour market. wage growth is also showing signs of

stated objective of monetary policy, which is " … to regulate credit and currency in the best interest of the economic life of the nation … and generally to promote the economic and financial welfare of canada. " this means that the bank should conduct monetary policy so as to provide conditions that will allow the economy to expand in line with its full production potential. by production potential i mean the highest level and growth rate of output that can be sustained over the long run without triggering inflation pressures. over time, gains in employment and incomes that go with an economy operating at potential will lead to rising living standards, maximizing our national welfare. what are the key factors that determine potential output? quantity and quality of labour are certainly among them, as are investment in physical capital ( that is, machinery and equipment, buildings, and infrastructure ), technological innovation, and managerial and entrepreneurial know - how. so, what role can monetary policy play here? the fact is that none of these factors are determined directly by monetary policy. but the bank can make an important contribution by instilling confidence in the public, specifically about the future value of money. this is fundamental. and it is in fact what monetary policy can deliver on a consistent basis. over the long haul, the single, most direct contribution that monetary policy can make to sound economic performance is by providing canadians with confidence that their money will keep its purchasing power. when inflation is low and stable, and when we all trust that it will stay that way, market signals are sent and received more clearly. and this leads to a more efficient allocation of economic and financial resources, which in turn helps to achieve our economic potential, in terms of growth in output, employment, and incomes. short - term economic fluctuations so that's the long run. but what can monetary policy do in the short term to " … mitigate by its influence fluctuations in the general level of production, trade, prices and employment, " as instructed in the preamble? consistent with our mandate, we work to reduce short - term volatility in output and employment. we cannot, of course, hope to do away with the business cycle altogether. but at a minimum, we can conduct monetary policy so that the economic ups and downs are not exaggerated, and in fact smoothed out. again, experience has taught us that a policy of low and stable inflation works best to stabilize the economy in the short run. how do we go about achieving a more stable economy through our focus on