) : 60 – 77 - 8social goals can support economic goals this leads me to my second challenge. we need to reject the idea that there is an inevitable trade - off between social and economic goals. human well - being is needed for economic growth, and the reverse is often true as well. there ’ s growing evidence that lower levels of inequality may make the economy less vulnerable to financial crises or periods of stagnation. 14 quebec ’ s public daycare system is a prominent example of a policy that creates a virtuous circle between social and economic goals : it helped families and also increased women ’ s participation in the labour force. in fact, it helped transform quebec from a province with one of the lowest participation rates among primeage women to a national leader in this regard. 15 there are other examples, including the public policy response to the pandemic. wage subsidies are helping maintain relationships between workers and employers, which in turn protects future growth. canada could also be made more resilient through policies that encourage equity rather than debt financing as a way to foster business creation and growth and support vibrant communities. the public sector can ’ t do it alone my third challenge to conventional wisdom is the realization that this is not only a public sector problem to solve. we need private sector investment in growthenhancing initiatives and smart incentives to go along with that. investment in green technology is just one example of how the private sector can pitch in to support longer term growth. canada ’ s oil and gas sector has shown tremendous capacity to innovate in the face of challenges and is making great strides in developing new technologies to reduce emissions. think of investments in cogeneration technologies — an innovation that increases efficiency and competitiveness while also reducing carbon footprints. 16 and financial firms are working to develop the market for green and transition bonds to increase financing options for climate - related projects. we ’ ve also seen some good examples of stakeholder capitalism in response to the pandemic as the private sector found ways to support growth. many financial institutions stepped up to allow deferrals in loan and mortgage payments. this 14 among others, see p. pascal, “ historical patterns of inequality and productivity around financial crises, ” federal reserve bank of san francisco working paper no. 2017 - 23 ( march 2020 ) ; and a. g. berg and j. d. ostry, “ inequality and unsustainable growth : two sides of the same coin? ” international monetary fund staff

can tell you that it took us a long time and a lot of work with different policy frameworks before we arrived at our current approach. by the late 1980s, it had become clear to the bank that an explicit policy framework, which could be easily and clearly communicated to the public, was necessary to deal with the inflation problem. in january 1988, former governor john crow articulated a clear need to focus on achieving price stability. as the macroeconomic problems intensified through the late 1980s, it became evident that what we needed was an explicit commitment to a path for bringing inflation down. the canadian experience : agreeing on targets for inflation control february 1991 marked a turning point in this process. at that time, the bank of canada and the government of canada, acting on a growing shared appreciation of the economic damage caused by high inflation, agreed to adopt explicit targets for inflation reduction. subsequently, inflation came down quickly - indeed, faster than envisaged by the agreement. by january 1992, it had already fallen to close to 2 per cent. now, i do not want to leave you with the impression that this was a quick and painless process. far from it. indeed, because of the magnitude of our imbalances, we had to take strong medicine and live with high interest rates for some time. this caused a lot of economic dislocation and pain in the short run. and even as interest rates came down, there was still an appreciable risk premium built into those rates that reflected, at least partially, our fiscal problems. but once the fiscal adjustment got underway, financial markets quickly took note of it and the risk premiums were reduced significantly. thus, we were able to reap one of the key payoffs of low inflation. the original inflation - control agreement with the government has been renewed three times - most recently, in may 2001. the current agreement, which runs to the end of 2006, continues to aim at keeping inflation at the 2 per cent midpoint of a 1 to 3 per cent target range. the fact that we aim at the midpoint is of the essence, as i shall explain later. through the past decade, and with two different governments, there has been increased shared appreciation among canadian authorities of the important contribution that inflation control can make to good economic performance. i want to underscore that, in a democratic society, it is essential that the central bank and the government share the ultimate objective of a well - functioning economy. and that they both