banking 5 and elsewhere. the bank's committee is called the governing council. it consists of the governor, the senior deputy governor, and four deputy governors. the governing council is advised by staff and by a monetary policy review committee, which looks at the evidence and the projections, and raises issues. open discussion and debate are encouraged. decisions benefit from the exchange of differing views among members – what james surowiecki calls the " wisdom of crowds. " 6 these differing views arise largely from different weightings of various aspects of the analysis presented by bank staff. the bank's clear goal – meeting the inflation target – helps to focus the deliberations. and with decisions made every six to eight weeks, there are frequent opportunities to take new soundings and adjust course. a good example of how we apply these strategies is the way we estimate potential output. potential output is important in understanding inflation dynamics over time, but, as i said earlier, it cannot be measured directly. we're not sure that our models fully capture potential output, especially when the economy is undergoing significant structural change. to add to the challenge, some of the data used in these models are frequently revised. so, in addition to the readings we get from our models, we also consider a number of alternative indicators of pressure on capacity. these indicators include the rate of capacity utilization, measures of labour shortages, building vacancy rates, reports from our quarterly regional surveys of firms, and the recent behaviour of inflation relative to expectations. of course we also consider more direct influences on inflation such as import prices, cost pressures such as wages relative to productivity, and inflation expectations. i should also mention that we meet, on a regular basis, with a wide variety of business people to discuss their investment and hiring intentions, their costs and their pricing decisions, and any constraints they may be facing. the information we obtain from these meetings helps us to interpret the numbers and better informs our judgment. of course, the strategies i have mentioned complement one another. taken together, they help the bank to arrive at a comprehensive and balanced view of developments in the canadian economy, the outlook for inflation, and the appropriate monetary policy action to keep inflation on target over the medium term. conclusion let me conclude. in my remarks today, i've described how the bank of canada deals with the uncertainty that underlies the conduct of monetary policy. the task of monetary policy is, and is sure to remain, a challenging one, given the limits of understanding

output going forward, as well as the future growth rate of the economy and the trend for inflation. we use judgment to decide on a course of action, keeping in mind that the " ship " of the economy responds slowly to a change in the policy interest rate, and that there could be headwinds or tailwinds to deal with. and because we get monthly data on inflation and output, we can correct our course, if necessary, on subsequent policy interest rate announcement dates. let me expand on this. in conducting monetary policy, the bank uses three main strategies to reduce uncertainty. first, we use a variety of models to produce economic projections and to examine alternative assumptions about key variables. the use of multiple models helps to provide comprehensive for further details on uncertainty in the conduct of monetary policy, see p. jenkins and d. longworth. 2002. " monetary policy and uncertainty. " bank of canada review ( summer 2002 ). available at : http : / / www. bankofcanada. ca / en / review / 2002 / longworth _ e. pdf. p. l. bernstein. 2006. " risk : the hottest four - letter word in financial markets. " in global perspectives on investment management : learning from the leaders, 221, edited by r. n. sullivan and j. j. diermeier. charlottesville, va : cfa institute. information and analysis, and helps to guard against policy errors that could result from relying on a single economic model. the models we use range from single - equation indicator models to multiequation reduced - form models to dynamic stochastic general - equilibrium models, such as our newest model of the canadian economy, totem. 4 the second strategy we use to reduce uncertainty is to bring together a variety of information and indicators before we make an interest rate decision. these include both quantitative and qualitative measures covering international and domestic economic developments, the regional business outlook, monetary and credit conditions, and the views and expectations of financial market participants. as we sift through this information, we try to look through the noise and discern fundamental trends. we look carefully at both corroborating and non - corroborating evidence. finally, we apply judgment. the bank of canada does this by means of a committee that debates the issues and comes to a decision. interestingly, research suggests that the composition of a committee and the structure of a meeting can affect the quality of decision making, both in central