the intended course for his ship. at that point in the process, monetary policy can seem like precision engineering. but just like at sea, in monetary policy, the view is not always perfectly clear. given what we ’ ve been through and continue to experience, our forecasts are not pinpoint numbers ; rather, they represent ranges of likely outcomes. likewise, our economic models are a better source of questions than answers. to make sure that such uncertainty is not just acknowledged but is actually embedded in our policy decisions, we have incorporated explicit “ rule - of - thumb ” ranges around the most critical variables for our projection. in doing so, we are reminding ourselves – and those who watch us – that, especially in the wake of the crisis, economic projections are subject to considerable uncertainty. bis central bankers ’ speeches indeed, while canada came through the global financial crisis and ensuing great recession better than our g - 7 peers, we are taking longer than expected – or desired – to get home. our economy still has not returned to full capacity, and inflation has been running persistently below our 2 per cent target. because of the unprecedented nature of the crisis and subsequent recession, the global recovery has been anything but smooth or normal. as we navigate these uncharted waters, we are especially vigilant in our lookout for risks that could push us off course. assessing risk through two lenses this lookout is an important element of our policy deliberations. we assess how risks could interact with each other. we gauge their potential impact. and we use judgment to determine the balance among them, both today and in prospect. in fact, monetary policy formulation these days is more a process of risk management than one of precision engineering. it is important to stress that risks are not part of our baseline forecast – they are not what the bank expects to see, but rather, they are the possible deviations from what we anticipate. we work to avoid or, at least, mitigate them. the bank of canada looks at risks through two lenses : ( i ) the possible impact on the outlook for real economic activity and inflation, and ( ii ) the possible impact on the stability of the financial system. these two sets of risks are related but, for the moment, let me discuss them separately. targeting inflation is necessarily a forward - looking activity. it is informed by the work of economic forecasters who crunch the data and use models to assess the most likely future path of inflation. as our inflation target

drift even further below target against the risks of exacerbating financial system imbalances. as central bankers, here in canada and globally, we are in new territory. it brings to mind the sailors of another era who were driven far off course by a nasty storm. when things calmed, they found themselves in the southern hemisphere. suddenly the navigational chart that they relied on – the night sky – was completely different. we have every reason to believe that, after the experience of the crisis is behind us, central banking will be defined very differently than it was just five years ago. we know now that economic and financial stability are intrinsically linked, and we are figuring out as we go how to better integrate the two in our analysis and research, and in our policy. on a technical level, we are actively building new models and adding new detail to our existing ones. we are spending more time talking to real people making real economic decisions, to understand better the forces we are facing. and, we are communicating differently, not just more, but with more transparency, with due regard to the uncertainty around us. i am confident that we ’ ve got it roughly right, given what we know and especially what we don ’ t. just like those sailors on the open seas, we will adapt and thrive – and find our way home. bis central bankers ’ speeches