##s. central counterparties ( ccps ) for otc derivatives will provide greater certainty of payment, mitigating the harmful spillovers resulting from the failure of a counterparty, and reducing contagion in times of stress. but ccps also have the potential to create new single points of vulnerability. this calls for the careful design of ccps, as well as robust regulation and supervision. it will also be important to ensure sufficient access to ccps to avoid limiting competition. this is of particular concern in countries, like canada, that are not host to a large global ccp. two paths to addressing these design issues are being actively considered. the first is to promote fair and open access to global ccps, combined with shared oversight arrangements, so that strong, large and mid - tier derivatives market participants can have efficient access to central clearing. the second is to build local ccps that are better aligned to local risks and local market conditions. a number of jurisdictions are committed to building their own onshore ccps, including, japan, korea, china, hong kong, singapore and brazil. here in canada we need to give serious consideration to the onshore option. this isn ’ t to say that we should take the global option off the table. however, there are good reasons to consider onshore ccps. going local would give regulatory authorities a high degree of oversight and supervision over systemically important financial market infrastructure. canadian authorities would also have much more control over the design and implementation of emergency measures, including the provision of emergency liquidity. the bank of canada is co - operating with our peers in the public sector and the canadian financial sector to determine the best path for the central clearing of otc derivatives. the bank of canada has also supported the development of a domestic ccp for canadian - dollar repos, which is scheduled to be launched later this year. implications for monetary policy i ’ d like to conclude with a few thoughts on what all this means for monetary policy. the first and most obvious point is that life should be better. putting basel iii into effect, combined with expanding the perimeter and reducing contagion, will reduce the frequency and ease the severity of financial crises. counter - cyclical capital buffers should help to lean against the build - up of excessive credit, moderating the financial accelerator and dampening economic fluctuations. all this should make the implementation of monetary policy easier. bis central bankers ’ speeches however, there will also be some new things for monetary policy

to be slightly weaker, reflecting more subdued u. s. activity. bis central bankers ’ speeches overall, the bank projects the economy will expand by 2. 8 per cent in 2011, 2. 6 per cent in 2012, and 2. 1 per cent in 2013, returning to capacity in the middle of 2012. in the near term, total cpi inflation is expected to remain above 3 per cent, largely reflecting temporary factors such as significantly higher food and energy prices. it is expected to return to the 2 per cent target by the middle of 2012 as the temporary factors unwind, excess supply in the economy is gradually absorbed, labour compensation growth stays modest, productivity recovers, and inflation expectations remain well - anchored. core inflation is slightly firmer than anticipated, owing to temporary factors and to more persistent strength in the prices of some services. core inflation is now expected to remain around 2 per cent over the projection horizon. although the global outlook remains broadly unchanged, global risks have intensified, most notably in europe. the three main upside risks to inflation in canada relate to the possibility of higher - than - projected commodity prices and global inflation, stronger momentum in canadian household spending, and the possibility that there is less excess capacity in the canadian economy. the three main downside risks to inflation in canada relate to sovereign debt concerns in europe, headwinds from the persistent strength of the canadian dollar, and the possibility that growth in canadian household spending could be weaker than projected. overall, the bank judges that the risks to the inflation outlook in canada are roughly balanced over the projection horizon. reflecting all of these factors, the bank yesterday maintained the target for the overnight rate at 1 per cent. to the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be withdrawn, consistent with achieving the 2 per cent inflation target. such reduction would need to be carefully considered. with that, tiff and i would be pleased to take your questions. bis central bankers ’ speeches