stephen s poloz : summary of the latest monetary policy report opening statement ( via video ) by mr stephen s poloz, governor of the bank of canada, at the press conference following the release of the monetary policy report, toronto, ontario, 16 april 2014. * * * good morning. tiff and i are pleased to join you today by videoconference. as you know, we are in toronto to attend the funeral this afternoon of canada ’ s former finance minister, jim flaherty. before we discuss the monetary policy report, i ’ d like to say a few words about him. what set jim flaherty apart was that while he was a formidable finance minister, he was first and foremost an ordinary man. you immediately connected to him after just a few minutes, and it was immediately clear that he was there for canada, 100 per cent. that ’ s what he did all day, every day. and to everything that he did, he brought a solid dose of common sense. people found that attractive and helpful, and his gut instincts were usually right. a lot of his legacy is right there for us. i ’ ll miss him tremendously, and canada is the poorer without him. let me turn now to the mpr, which the bank published this morning. before we take your questions, allow me to note its highlights. • inflation in canada remains low. core inflation is expected to stay well below our 2 per cent target this year and it will take close to two years for it to return to the target. total cpi inflation is expected to move closer to the target in the coming quarters due to temporary factors. • let me take a moment to explain this inflation forecast. core inflation is expected to remain below target due to the effects of economic slack and heightened retail competition. we expect these effects to persist until early 2016. • however, total cpi inflation will move up this year, before core, in response to higher consumer energy prices, as well as the lower canadian dollar. • we expect total cpi inflation will remain fairly close to target throughout the projection period. that ’ s because in 2015 and into early 2016, as the upward pressure from energy prices dissipates, the downward pressure from retail competition should gradually fade and excess capacity will be falling. this will cause core inflation to make its way gradually up to 2 per cent, catching up to total cpi inflation from below. • the global economic expansion is expected to strengthen over the next three years as

that is where a borrowing bank itself has originated, or has some other close financial links to, the assets comprising the collateral. other features of the dwf are very different from those underpinning the sls. first, dwf borrowings typically have a term of 30 - days. 7 the dwf is intended to act as a bridge in the event of a liquidity shock. for a relatively mild shock that might support a counterparty to the next regular iltr, 8 or to planned debt issuance. for greater shocks, the solution might require more fundamental changes in the firm ’ s balance sheet ( e. g. asset disposals ). in any case, before it will agree to lend in the discount window, the bank of england will need to be convinced that there is a credible path to a point where access is no longer required. crucially, the dwf is only intended to provide short - term liquidity support to banks – and is not intended to be used as a replacement for funding, which can only be sourced in a sustained way from private markets. and it is vital to stress that the dwf is not a 100 % committed facility. at the point of application, the bank will make a fresh, independent assessment of whether it deems the counterparty to be solvent and viable. to guard against moral hazard, the dwf charges fees which make it unattractive in normal times, but which would be more attractive under stressed market conditions. because the for more information, see fisher ( 2011 ), “ recent developments in the sterling http : / / www. bankofengland. co. uk / publications / documents / speeches / 2011 / speech487. pdf. for more information see john, roberts and weeken ( 2012 ), “ the bank of england ’ s special liquidity scheme ”, in the bank ’ s spring 2012 quarterly bulletin. currently the bank also offers at its discretion the option of a drawing of up to 364 - days, for an additional fee. although counterparties are not guaranteed an allocation in these auctions, they are able to bid up for liquidity, increasing their chances of being allocated. bis central bankers ’ speeches monetary framework ”, dwf is structured as a liquidity upgrade, the fees charged are linked to the type and liquidity of collateral delivered. the more illiquid the collateral, the greater the value of the upgrade, and hence the higher the fee