investment in canada. this leaves the level of economic activity lower than the bank had been expecting. • while household spending remains solid, and various indicators in the housing sector continue to rise, slower growth of household credit and higher mortgage interest rates point to a gradual unwinding of household imbalances. • the bank expects that a better balance between domestic and foreign demand will be achieved over time and that growth will become more self - sustaining. but this will take longer than previously projected. • we are expecting investment growth to contribute to a rebound in the rate of labour productivity growth over the next couple of years. however, demographic factors, bis central bankers ’ speeches primarily the aging population, are expected to put a drag on the growth rate of trend labour input. this drag will largely offset the effects of rising investment. this is why we expect that the growth rate of potential output will remain fairly stable at around 2 per cent over the next three years. • real gdp growth is projected to increase from 1. 6 per cent this year to 2. 3 per cent next year and 2. 6 per cent in 2015. the bank expects that the economy will return gradually to full production capacity, around the end of 2015. • inflation in canada has remained low in recent months. this reflects the significant slack in the economy, heightened competition in the retail sector, and some other sector - specific factors. • with larger and more persistent excess supply in the economy, both total cpi and core inflation are expected to return more gradually to 2 per cent, around the end of 2015. • although the bank considers the risks around its projected inflation path to be balanced, the fact that inflation has been persistently below target means that downside risks to inflation assume increasing importance. however, the bank must also take into consideration the risk of exacerbating already - elevated household imbalances. • weighing these factors, the bank judges that the substantial monetary policy stimulus currently in place remains appropriate and last week decided to maintain the target for the overnight rate at 1 per cent. with that, tiff and i would be pleased to take your questions. bis central bankers ’ speeches

of houses in canada has been relatively unchanged since 2008. evidence in “ debt and ( not much ) deleveraging ” ( mckinsey global institute, february 2015 ) suggests that much of the debt in countries in the comparison group is held by relatively high - income households. e. cerutti, s. claessens, and l. laeven, “ the use and effectiveness of macroprudential policies : new evidence, ” imf working paper wp / 15 / 61, march 2015. ibid. mortgage underwriting standards have also been tightened recently in many countries, as they have implemented the financial stability board ’ s principles for sound residential mortgage underwriting practices, april 2012. uninsured mortgages are still available with longer amortizations ; the normal maximum is 30 years. the total debt - service ratio is the percentage of gross annual income required to cover annual payments associated with housing and all other debt obligations. the gross debt - service ratio includes only housingrelated payments. other changes to insured mortgages include a minimum credit score, with limited exceptions ; stronger loan documentation standards to ensure the reasonableness of the property value and of the borrower ’ s sources and level of income ; mortgage insurance eliminated for non - amortizing home - equity lines of credit ; and mortgage insurance now limited to homes with a purchase price of less than $ 1 million. in addition, mortgage and mortgage insurance underwriting principles have been made consistent with international standards. see guidelines b - 20 and b - 21issued by the office of the superintendent of financial institution. bis central bankers ’ speeches from 14 per cent in 2007 – 08 ( 3 - month growth, annualized ) to around 5 per cent in 2013 – 15. 36 conclusion let me conclude with a few key points from the mountain of facts, graphs and analysis that i have reviewed with you today. as i mentioned at the outset, the purpose of my presentation is to help provide more context for an informed discussion about housing and house prices given their importance to the canadian economy and the financial system. first, real house prices have been rising relative to income in canada and other comparable countries for about 20 years. there are many possible explanations, mostly from the demand side, but also from the supply side. second, in terms of demand, demographic forces, notably migration and urbanization, have played a role in the evolution of house prices, as have improving credit conditions through lower global real long - term