stephen s poloz : release of the monetary policy report opening statement by mr stephen s poloz, governor of the bank of canada, at the press conference following the release of the monetary policy report, ottawa, ontario, 20 january 2016. * * * good morning, and thank you for coming today. let me begin as usual with a few remarks around the issues that were most important to the governing council ’ s deliberations. at the global level, 2015 was a little disappointing as the world dealt with diverging economic prospects and shifting terms of trade, but we expect gradual strengthening to resume in 2016. there has been considerable attention paid to recent developments in china, and this has added to volatility in global financial and commodity markets. however, it was governing council ’ s judgment that china will remain on its transition to a more balanced and sustainable growth path, from around 7 per cent annual growth to around 6 per cent. volatility in equity markets is, of course, not always a reflection of weak economic fundamentals. nevertheless, the global equity - market correction may inject a further measure of caution into business decision making. our global outlook remains positive, albeit cautiously so. governing council believes that the u. s. economy remains solid – the fourth quarter of 2015 was soft, but we believe this to be largely temporary for reasons we discuss in the monetary policy report ( mpr ). solid fundamentals, including strong employment gains, high consumer confidence and very strong investment outside the energy sector should see u. s. growth return to close to 2 1 / 2 per cent this year. not coincidentally, the canadian economy appears to have stalled in the fourth quarter. there were some temporary factors at work for us, too, but the main issue was slower exports to the u. s. we expect growth to pick up to 1 per cent in the first quarter, along with the u. s., and then to move back above 2 per cent for the remainder of the year. our new annual growth forecast for 2016 is 1. 4 per cent ; however, much of the downward revision in that figure is because of the weakness we saw in the final quarter of last year. on a fourthquarter - over - fourth - quarter basis, growth for 2016 is projected to be a more solid 1. 9 per cent. in its deliberations, governing council focused mainly on the implications of lower prices for oil and other commodities for canada and for monetary policy. this shock is

economy as it approaches its capacity to produce and reduce the amount of monetary stimulus in place in a timely and measured manner. we want to ensure that inflation stays close to the target so that, over the medium term, our economy can continue to grow at full capacity. what do we mean by " timely and measured "? " timely " relates to the fact that there is always a lag between our policy actions and their effect on the economy. we must be timely and forward - looking because our actions take a year to 18 months to have their full effect on output, and 18 months to 2 years to have their full effect on inflation. " measured " relates to the judgments that we will make as we approach full capacity. if the economic data going forward tell us that we are taking up excess capacity more quickly than expected, we would have to reduce monetary stimulus more quickly. but if the data suggest that the return to full capacity is going more slowly than we thought, we would then need to move more slowly. allow me to close by using the familiar car analogy. over the past year we put our foot on the gas to help us get up the hill of economic difficulties. the prudent thing now, as we return to more normal driving conditions, is to ease off on the gas — ease off, not slam on the brakes — to make sure that we continue our journey along the highway at a safe cruising speed. it is in line with this that we moved, on 16 april, to raise the target for the overnight interest rate by 25 basis points.