). economic outlook let me close with a few words about the economic outlook. the intensification of the global financial crisis has led in canada to an increase in credit spreads and a tightening in credit conditions generally. the global recession is deepening, and with it there have been further declines in the prices of many commodities and a deterioration in canada's terms of trade, which reduces canadian incomes. the nature of the slowdown in the united states, with the acute weakness in the housing and auto sectors, is particularly problematic for our exporters. these factors present serious challenges to canadian industries, including key nova scotia industries in the primary resources, manufacturing, and tourism sectors. thus, while domestic demand in canada remains relatively healthy and the depreciation of the canadian dollar will offset some of the declines in external demand, the risks to growth and inflation in canada identified in the october monetary policy report appear to have shifted to the downside. in the face of the crisis, we have already cut official interest rates by half, to 2 1 / 4 per cent over the past year and have stated that some further monetary stimulus will likely be required to achieve the inflation target over the medium term. conclusion let me conclude. we have avoided the worst effects of the global financial crisis, thanks to a resilient financial sector built on the conservative lending practices of canadian banks, and to our effective regulation and prudent practices in the sector. still, the crisis is being felt in our economy. but we have taken bold steps to re - open financial markets and i can assure you that the bank of canada will continue to provide as much liquidity as is needed to encourage the re - establishment of the normal functioning of canadian financial markets. you can also count on the bank to add its voice to calls for initiatives to strengthen the resiliency of both the domestic and international financial systems.

pierre duguay : fostering financial system stability remarks by mr pierre duguay, deputy governor of the bank of canada, to the pictou county chamber of commerce, pictou, nova scotia, 27 november 2008. * * * good evening. it's a great pleasure to be here. when i last spoke in nova scotia three years ago – almost to the day – i discussed the bank of canada's role in strengthening the country's financial system to make it resilient to shocks so as to limit damage from inevitable economic and financial storms. it was a timely metaphor, given that i spoke shortly after hurricane katrina had breached the levees of new orleans. we were concerned at that time about the buildup of global economic imbalances, and about the narrowing of risk spreads which suggested that risk was perhaps being underestimated and vulnerable to a sudden reversal. these factors have since proven to be key contributors to the current, worldwide turmoil in financial markets. a third contributing factor, which we didn't foresee, has been the extent to which financial markets had expanded without proper support structures, like a house built on sand. i'll have more to say on this point a bit later in my remarks. so, i thought it would be worthwhile to review the risks we were aware of leading up to the current crisis, what took us by surprise, and what we have learned must be done to strengthen financial system resiliency for the future, both here and abroad. the canadian financial system has fared relatively well through this crisis, thanks to effective regulation and prudent practices that have worked like sandbags to protect our financial system from the storms in today's global economy. in this respect, we may be a model for much of the world. but, because our prudential regulation is focused on protecting institutions, rather than supporting core financial markets, we have learned that there is still much work to do in this area. so i will also discuss some reforms that may be necessary to mitigate the effects of future global financial crises. i will close with a few words on the current economic situation in canada. the global financial crisis we have all heard a great deal about the tumultuous global events that began in the summer of 2007 as a result of rapidly rising delinquencies on subprime mortgages in the united states. the sudden realization that exposure to these defaults was both widespread and difficult to locate ( because of