david dodge : update on economic and monetary developments in canada opening statement by mr david dodge, governor of the bank of canada, before the standing senate committee on banking, trade and commerce, ottawa, 30 april 2002. * * * when malcolm and i appeared before you at the end of last november, a heavy cloud of uncertainty hung over the outlook for the world economy and for canada. much of that uncertainty stemmed from the september terrorist acts in the united states, which came at a time when the global economy had slowed more than expected. to counter that uncertainty and bolster consumer and business confidence, the bank of canada moved aggressively to provide monetary stimulus. between last september and january 2002, we lowered interest rates by 200 basis points, bringing the total reduction since january 2001 to 375 basis points. as it turned out, consumer confidence was not as badly shaken in the aftermath of those tragic events as had been widely feared. indeed, confidence bounced back as perceived geopolitical and economic uncertainties diminished. the world economy has begun to strengthen. here in canada, a robust recovery appears to be underway. growth in the fourth quarter of last year and the first quarter of 2002 was appreciably stronger than expected, so that the level of economic activity is now higher than we thought it would be six months ago. this momentum is reflected in the extraordinary number of new jobs created since the beginning of 2002. in terms of the two scenarios we had painted last november, clearly, we are into the more optimistic one, in which a recovery in consumer confidence leads to an early resumption of economic growth. what do we see now as we look ahead? the bank projects that, in the first half of 2002, the canadian economy will grow by between 3 1 / 2 and 4 1 / 2 per cent, at annual rates. and we expect that it will continue to expand in the second half of the year and in 2003 at a rate somewhat above that of its production capacity ( or potential ), which we estimate to be around 3 per cent a year. you may recall, senators, that at our last visit i spoke about the concept of potential output. we set monetary policy so as to keep inflation low and stable, thus contributing to sustaining economic growth at its full potential. six months ago, we assumed that our economy would be growing at a pace well below the rate of capacity growth in the fourth quarter of last year and the first quarter of this year. we thought that the gap between the actual

pierre duguay : the conduct of monetary policy - dealing with changes in the terms of trade remarks by mr pierre duguay, deputy governor of the bank of canada, to the school of business, okanagan college, kelowna, british columbia, 4 april 2006. charts for the speech can be found on the bank of canada ’ s website. * * * good evening. i'm delighted to be here in kelowna, in the beautiful okanagan valley. it's good to be back in a classroom, speaking to business and economics students. for those of you who want to work in finance or the wider world of business, it is particularly important that you have a solid grasp of economic issues and that you understand how monetary policy contributes to the economic and financial well - being of canadians. and as you will find out, economics is a way of thinking, one that combines logic and pragmatism. the more you know about basic economic concepts, the better you'll perform in whatever career you choose. what i would like to do in the next 20 to 30 minutes is explain how monetary policy helps the economy adjust to important shocks that occur from time to time, including sharp movements in our terms of trade. i will start with the objective of monetary policy. then i'll describe how monetary policy works and where the exchange rate fits in. i will then explain what we mean by " terms - of - trade " shocks and show how canada's monetary policy framework helps to facilitate the adjustment to these shocks. i'll leave plenty of time at the end of my remarks for questions. let me start with the objective of monetary policy. the objective of monetary policy the ultimate goal of canadian monetary policy is to help our economy achieve its maximum sustainable growth, and thus contribute to rising living standards for canadians. the best way to achieve this goal, we've learned from experience, is to keep inflation low, stable, and predictable. inflation, as measured by the annual rate of increase in the consumer price index ( cpi ), has been running at about 2 per cent for more than a decade now. but in the 1970s and 80s, the rate of price increases was a good deal higher, spiking twice to well over 10 per cent. i doubt that many of you here tonight remember those days of high and variable inflation. high inflation exacted a heavy toll on canadians. borrowers faced high and volatile interest rates. incomes and savings