and support the economy during the pandemic. this work is nearly done, and once it is completed, we will publish our review together with an assessment by an independent panel of experts. but some of the key takeaways are already clear. 2 / 7 bis - central bankers'speeches our pandemic response was effective in restoring market functioning, preventing an even worse economic calamity, and supporting the recovery. the crisis was developing rapidly, and a quick and bold response was critical. but we can see in retrospect that when we use extraordinary tools, we need to be clear about what we're trying to achieve with those tools and under what conditions they'll no longer be needed. perhaps most importantly, we need to remember that the actions we took were truly extraordinary. the bar to use exceptional tools has always been high in canada - and it should remain high. these are not conventional monetary policy. we also need to take on board the lessons from the surge in inflation that followed. why did inflation rise so rapidly? and how effectively did monetary policy respond? to be prepared for the future, we need to be clear - eyed about what surprised us. my colleagues and i have already written and spoken about some of the lessons, so i can be brief here. 1 but i'll highlight three. first, economic supply matters every bit as much as demand, and we need to understand it better. monetary policy typically focuses mostly on demand. that's because interest rates largely affect demand and because supply usually evolves more smoothly and predictably. the pandemic reminded us we cannot take that for granted. supply disruptions can be sudden, severe and persistent, they can accumulate, and they are more inflationary when demand is strong. we also learned that what matters for inflation is not only the demand - supply balance for the economy as a whole but also across different sectors. the disinflation in weak sectors may be smaller than the inflationary impact of sectors that are overheated. in the future, we need better information and analysis about the supply side of the economy. second, we learned that price - setting behaviour changes when inflation is high. typically, businesses are hesitant to raise prices. they worry their price increases will stand out and they'll lose customers to their competitors. but as the economy came out of the pandemic, supply disruptions and higher commodity prices pushed up costs. and demand was very strong. businesses had trouble keeping

david dodge : past adjustments and future trends in the canadian economy remarks by mr david dodge, governor of the bank of canada, to the london chamber of commerce, london, ontario, 8 december 2003. * * * good afternoon, ladies and gentlemen. i ’ m happy to have this opportunity to visit the forest city and to finally honour your long - standing invitation to address you. when giving a speech near the end of a year, it is common practice to look back over the past 12 months, consider what we have learned from the events and experiences of the year, and think a bit about what might lie ahead. i became governor of the bank of canada in 2001 and, since that time, i have found myself saying at the end of each year, “ well, we won ’ t see another year like that again. ” in 2001, we saw the bursting of the tech bubble and the 9 / 11 terrorist attacks in the united states. last year, we had the fallout from enron and other examples of corporate malfeasance, as well as the growing threat of war in the middle east. and our currency dropped to an all - time low against the u. s. dollar. not to be outdone, 2003 has also had more than its share of momentous events that had an impact on the canadian economy. the list seems almost biblical : war, pestilence, in the form of sars and madcow disease, fires, floods, a hurricane, and a power outage. this year also brought another type of shock to keep canadians preoccupied, and that is the sharp rise of our currency in foreign exchange markets. the canadian dollar has jumped from under 64 cents u. s. at the start of the year to over 76 cents at the end of last week - an unprecedented movement. the bank of canada has closely followed the economic effects of all these events, including the rapid movement of the canadian dollar. but to better understand what has happened in the economy over the past year or so, i will place my comments in the context of longer - term economic trends. the adjustments of the 1990s let me start by recalling the state of our economy as the 1990s began. although inflation had come down from the very high levels seen in the early 1980s, it was still quite high by today ’ s standards. several approaches had been tried to bring about an environment of low, stable, and predictable inflation. these included wage and price controls and the targeting of the