differences of opinion about the appropriate definition of price stability or how quickly to return to the target inflation rate when unanticipated events cause a deviation from the target. more importantly, with a common currency, individual countries can no longer benefit from having their national currency operate as a buffer in the event of an economic shock. take the case of a sharp rise in world energy prices. in this instance, an energy - producing country would experience rising incomes, expansionary demand pressures, and perhaps increased capital inflows. countries that are heavy users of energy would experience the opposite effects. exchange rate movements can help smooth the economic adjustment to such a shock, through a rise in the currency of the energy - producing country and a decline in the currency of the energyimporting country. where exchange rate movements are not an option, as within the current euro area, greater price and wage flexibility or greater worker and capital mobility between national economies will be needed in response to the shock. otherwise, the adjustment will be more painful and costly, involving greater fluctuations in national output and employment. europe is still characterized by significant wage and price rigidities and by low worker mobility, which could make the adjustment to shocks more difficult. evidently, the hope is that participation in the currency union will act as a catalyst for action to reduce or eliminate these rigidities. the economic case for a common currency in europe rests mainly on a judgment that buffering differential shocks in the partner countries will be a less important consideration than the benefits from lower transactions costs and from the greater economic certainty because of reduced currency risk. this presumes that the economic structures of these countries are sufficiently alike that any shocks will be felt by all of them at roughly the same time and to a similar degree. a good number of the euro countries probably fall into this category. those that do not may find themselves having to adopt measures to increase price and wage flexibility, as well as encourage worker and capital mobility, to take the place of adjustments in the exchange rate. what are the implications and relevance of the european currency model for canada? canada ’ s trade links with europe are relatively modest. only 4 % of our exports go to euroland countries and about 7 % of our imports come from there. so the direct economic effects on canada from any developments in europe related to the move to a common currency are likely to be rather limited, at least in the short run. of course, should the new monetary union lead to changes in world trade and finance

tiff macklem : opening statement before the standing senate committee on banking, commerce and the economy opening statement by mr tiff macklem, governor of the bank of canada, before the standing senate committee on banking, commerce and the economy, ottawa, ontario, 1 may 2024. * * * good afternoon. i'm pleased to be here with senior deputy governor carolyn rogers to discuss our recent policy announcement and the bank of canada's monetary policy report. in april, we maintained our policy interest rate at 5 % and published a revised outlook for the canadian economy. we had three key messages. first, monetary policy is working. total consumer price index ( cpi ) and core inflation have eased further in recent months, and we expect inflation to continue to move closer to the 2 % target this year. second, growth in the economy looks to be picking up. we expect gdp growth to be solid this year and to strengthen further in 2025. third, as we consider how much longer to hold the policy rate at the current level, we're looking for evidence that the recent further easing in underlying inflation will be sustained. before taking your questions, let me take a moment to discuss recent economic data and the outlook for growth and inflation. in canada, growth stalled in the second half of last year and the economy moved into excess supply. the labour market also cooled from very overheated levels. with employment growing more slowly than the working - age population, the unemployment rate has risen gradually over the last year to 6. 1 % in march. there are also some signs that wage pressures are beginning to ease. economic growth is forecast to strengthen in 2024. strong population growth is increasing consumer demand as well as the supply of workers, and spending by households is forecast to recover through the year. spending by governments also contributes to growth, and us strength supports canadian exports. overall, we forecast gdp growth in canada of 1. 5 % this year and about 2 % in 2025 and 2026. the strengthening economy will gradually absorb excess supply through 2025 and into 2026. cpi inflation was 2. 9 % in march, and price increases are now slowing across most major categories. however, shelter cost inflation is still very high and remains the biggest contribution to overall inflation. 1 / 2 bis - central bankers'speeches looking ahead, we expect core inflation to continue to ease gradually. the more timely three - month rates of core inflation are well below the 12 - month rates, suggesting