begin to close until the first quarter of next year, at the earliest. the bank will provide a full update of its outlook for the canadian economy on 23 april when it publishes its monetary policy report. prospects for recovery : restoring global confidence the timing of the global and canadian recoveries depends crucially on two related factors : the stabilization of the global financial system and the restoration of confidence among households and businesses. across the world, the paradox of thrift is now in full force. firms are postponing investment projects and building cash reserves. households are delaying purchases and increasing their savings. banks are curtailing lending and hoarding capital. these decisions, even if individually rational, are collectively damaging to our economic prospects – and are ultimately self - defeating. once this dynamic has been set in motion, it will only be broken by decisive measures to restore confidence. this will not happen overnight. to quote montek singh ahluwalia, deputy chairman of india ’ s planning commission, “ confidence grows at the rate that a coconut tree grows, but confidence falls at the rate that the coconut falls. ” to restore confidence, policy initiatives must be sizable, forward looking, and credible. that is, they should be scaled to the severity of the shocks, take into account the secular shifts just outlined, and incorporate an exit strategy. most fundamentally, policies must be fully consistent with well - articulated frameworks that support sustainable economic growth. as the bank has consistently emphasized, stabilization of the global financial system is a precondition for economic recovery, globally and in canada. in this regard, there are three requirements : 1 ) keep the system functioning ; 2 ) address legacy or toxic assets ; and 3 ) develop more fundamental reforms. this terms - of - trade shock can be expected to materially lower profits for our producers, reduce wages and employment for workers in our resource sectors, impair orders from related industries and services, and lower revenues for governments. in order to keep the system functioning, central banks have responded aggressively and creatively to supply liquidity. these efforts have been largely successful with interbank lending rates narrowing substantially since the worst periods last fall. reflecting both the strength of our financial system and the timeliness of the bank of canada ’ s response, canadian spreads have been the best performing of the major economies. conditions have been slower to improve in other markets. the issuance of commercial paper ( cp ) and asset - backed commercial paper ( abcp ) has stabilized, but spreads remain wide and mat

stephen s poloz : release of the monetary policy report opening statement by mr stephen s poloz, governor of the bank of canada, at the press conference following the release of the monetary policy report, ottawa, ontario, 18 april 2018. * * * good morning. senior deputy governor wilkins and i are happy to be with you to answer your questions about today ’ s interest rate announcement and our monetary policy report ( mpr ). before taking your questions, let me briefly offer a few insights into governing council ’ s deliberations. inflation is on target and the economy is operating close to potential. that statement alone underscores the considerable progress seen in the economy over the past 12 months. that said, interest rates remain very low relative to historical experience. this is because the economy is not yet able to remain at full capacity on its own. furthermore, the sustainability of this level of activity is not assured ; although we expected the economy to moderate in the second half of 2017, that moderation has extended into early 2018 and has been more pronounced than expected. governing council considered recent economic data very carefully and concluded that the softness early this year was due mainly to two temporary factors. the first relates to changes to mortgage rules that went into effect at the start of the year. these caused house sales to be pulled forward into the fourth quarter of 2017. although we are still expecting the housing sector to moderate in 2018 compared with last year, we can expect a partial recovery of activity in the second quarter. the second factor is the unexpected drop in exports during the first quarter, much of which was related to transportation bottlenecks. this points to a partial recovery in the second quarter and later in the year. notice that we are expecting only a partial recovery in the level of exports — an issue i will return to in a moment. accordingly, we expect a strong rebound in the second quarter after a lacklustre first quarter, with an average growth rate of about 2 per cent in the first half of the year and a return to nearpotential growth thereafter. fiscal stimulus, both provincial and federal, is playing a role in this forecast. we will be monitoring the data for the second quarter very closely in the weeks ahead. assuming our forecast remains on track, it is governing council ’ s view that interest rates will need to move higher over time to keep inflation on target. we acknowledge that the forces weighing on the economy mean that monetary policy is likely to remain stimulative to some