a higher target, see o. blanchard, g. dell ’ ariccia and p. mauro, “ rethinking macroeconomic policy, ” imf staff position note, 12 february 2010. bis central bankers ’ speeches the integration of financial stability considerations – a work in progress the bank concluded in 2011 that monetary policy should be the last line of defence against financial imbalances. this has since become the dominant view in the central bank community. nonetheless, after years of aggressive monetary stimulus in major advanced economies, concerns about the buildup of financial stability risks have increased, leading some to question whether the appropriate trade - offs are being made between price stability and financial stability. indeed, some critics have argued that the current monetary stimulus is simply sowing the seeds of the next financial crisis. however, as governor poloz discussed in a recent speech, the alternative is not attractive. 10 here in canada, financial stability risks – mainly household imbalances – have been on our radar. to address these imbalances, a number of regulatory changes were made, which have contributed to a more constructive evolution, although the risks have been edging higher. 11 financial stability risks have also been taken into account as part of our risk - management approach to monetary policy. 12 when the flexibility inherent in getting inflation back to target within a reasonable time frame permits, the bank has opted for tactics that do not exacerbate financial stability concerns. the bank adopted a tightening bias from april 2012 to october 2013, noting that the evolution of risks related to household imbalances may be a factor affecting the timing and degree of withdrawal of monetary stimulus. thus far, however, the bank has not had to use its monetary policy instrument to lean against financial risks. going forward, additional research will be helpful to specify more fully the circumstances under which it would be appropriate for the bank to use monetary policy for financial stability purposes. recent work at the bank suggests that the best outcome is achieved when macroprudential policy targets emerging imbalances in the economy, such as excessive growth in credit, leaving monetary policy free to focus on price stability. 13 of course, these polices must take account of one another. thus, for example, tighter macroprudential policy would require a more stimulative monetary policy, other things being equal, and vice versa. how to best integrate price stability and financial stability remains a work in progress. implementation of the global financial reform agenda both here and abroad should increase

that the biggest effect for canada of a more negative global growth scenario would be a steeper drop in commodity prices and, as in 2015, a significant depreciation of the canadian dollar. in contrast to these adverse global developments, the canadian economy is demonstrating resilience overall. the economy continues to create new jobs at a solid pace, the unemployment rate is near an all - time low, many companies are reporting an acute shortage of skilled workers, and wage growth is picking up noticeably in the past six months or so. the housing sector is clearly on the rebound, having digested the various housing policy changes put into place during 2016 – 18, and is still being fuelled by relatively high rates of immigration. consumption spending has held up relatively well on average, supported by the solid labour market and low interest rates, even as the savings rate has been edging higher. at the same time, energy - producing regions continue to struggle, as the full adjustment to the decline in oil prices back in 2015 is not yet complete, and transportation constraints are making the situation worse. you may recall that back in 2015 we said that the full adjustment would take up to five years — that even with lower interest rates and a lower dollar, as well as fiscal stimulus, 1 / 2 bis central bankers'speeches the adjustment to such a large shock takes a long time. it is painful for individuals, as it involves extended layoffs and possibly interprovincial migration, which is costly for all concerned. all this adds up to a complex outlook for canada, with considerable variation across regions and sectors. the strong labour market points to sources of growth such as information technology and other professional services, tourism, education, health care and financial services. some of this growth is being offset by negative effects coming through business investment and exports, particularly in manufacturing and the resource sector. on the whole, however, it appears that our economy is still operating close to capacity but probably with a modest amount of excess supply. governing council agreed that, all things considered, this excess supply is probably not pervasive. furthermore, our situation differs from many other countries in that inflation is at our 2 percent target today and projected to remain very close to target, despite the presence of modest excess supply. however, we acknowledge the downside risks, as set out in our alternative scenario in box 3. governing council also devoted some time to a discussion of the evolution of financial vulnerabilities in canada. we have been encouraged by developments