stephen s poloz : opening statement before the house of commons standing committee on finance opening statement by mr stephen s poloz, governor of the bank of canada, before the house of commons standing committee on finance, ottawa, ontario, 31 october 2017. * * * good afternoon, mr. chairman and committee members. senior deputy governor wilkins and i are happy to be before you today to discuss the bank ’ s monetary policy report ( mpr ), which we published last week. when we were last here in april, we were celebrating the fact that we had upgraded our economic forecast following a long period of disappointment. i am happy to tell you that many of the positive trends that we saw then have continued. sources of economic growth have broadened across sectors and regions, and the process of adjustment to the oil price shock is essentially complete. the bank raised its policy interest rate twice since our last visit, in july and september. we did this in the context of very strong economic growth over the first half of the year and solid progress in the labour market. over the summer, we saw evidence of firming inflation and an economy that was rapidly closing its output gap. with these two rate increases, we have taken back the cuts we made in 2015, which were crucial in helping the economy adjust to the oil shock. growth in the first half of the year averaged just over 4 per cent at an annual rate. this reflected strong consumer spending backed by rising employment and income, together with increased business investment and a jump in energy exports. we are now starting to see signs of moderation in the second half, which we forecast in july. growth in consumption and investment is expected to ease, and growth in housing is projected to slow further, in part because of the measures introduced by the ontario government in april. all told, we forecast that the economy will expand by 3. 1 per cent this year, before slowing to 2. 1 per cent in 2018. this is still faster than the growth rate of potential. we estimate that the economy is now operating close to its capacity. inflation should reach our 2 per cent target in the second half of next year, a little later than earlier projected because of the temporary impact of the stronger canadian dollar this year. we are at a crucial spot in the economic cycle, and significant uncertainties are clouding the way forward. in our mpr, we identified the four most important sources of uncertainty. i will touch on these now. the first issue is inflation

in the united states, given the range of potential outcomes and the uncertainty about timing. however, we acknowledge that uncertainty about future us trade policy is having some impact on business confidence and investment spending, and this impact is reflected in our outlook. in this context, governing council judged that the current stance of monetary policy is appropriate. we agreed that the economy is likely to require less monetary stimulus over time, but we will be cautious in making future adjustments to our policy rate. in particular, the bank will be guided by incoming data to assess the sensitivity of the economy to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation. with that, mr. chairman, senior deputy governor wilkins and i would be happy to answer questions. 2 / 2 bis central bankers'speeches