by the us central bank. the federal reserve ’ s assessment that interest rate increases were necessary because the growth of demand in that country continued to outstrip the growth of supply, was an important factor in our decision to match those moves. the reason was that this implied a continued spillover of us demand into canada, which would add to the already buoyant growth in spending by canadian households and businesses. this additional external demand for our products, at a time when domestic demand here was already brisk, essentially increased the risks that we would run into capacity constraints and pressures on inflation. clearly, us economic and financial developments will always be relevant for canada. after all, we do over 80 % of our foreign trade with that country. and us financial markets have an important influence on interest rates worldwide, including ours. but that does not mean that the bank of canada must always follow the federal reserve, or that interest rate levels here and in the united states must be the same. the job of canadian monetary policy is to respond to trends in our own economy. naturally, because of the close ties between canada and the united states, economic trends in the two countries are often similar, and may require similar policy responses. but this is not always the case. since mid - 1999, the americans have raised their interest rates on six occasions. we have raised ours four times. moreover, canadian interest rates continue to be below us rates because inflation here has been lower and our economy has not been growing as quickly, or for as long, as theirs ( so that the risks of pressures on capacity and inflation in canada are not as intense ). still, i can appreciate that, when our economies move together, people may find canadian monetary policy difficult to interpret - particularly when the bank has moved immediately to match increases in us policy rates. on those occasions, there has been a tendency to conclude that either the bank does not have much choice but to follow, or that it must have targets for the canadian dollar that require interest rates here to move in lock - step with us rates. neither of these assumptions is correct. when us monetary authorities take a policy action, the bank looks carefully at the reasons behind the move and at what it all means for our ongoing assessment of the outlook for total demand and inflation in canada. our job is to do what we think is necessary to keep our economy on a non - inflationary, and thus more sustainable, growth path. new procedures for announcing monetary policy actions i would now like

is the beginning of a sustained improved performance on this front. because of this, the bank will be closely watching all indicators that could provide early signs of such an occurrence. but we must be careful not to let our hopes run ahead of reality and take risks with inflation. a flare - up in inflation and the higher interest rates that would go with it would discourage investments, especially those in high - tech equipment and software, that enhance productivity and are so crucial to improved economic performance in the future. the outlook for the canadian economy is very promising. the best contribution the bank can make to realizing this economic potential is to preserve the present environment of low and stable inflation. for this is what fosters sustained solid economic growth and improved standards of living over time. i can assure you that the bank of canada remains fully committed to the task.