even higher interest rates down the road and a more pronounced slowing of the economy. given the outlook for inflation, we continue to judge that the policy interest rate will need to rise further. as the effects of tighter monetary policy work through the economy, we will be assessing how much higher interest rates need to go to return inflation to target. 1 t. chernis and c. luu, “ disaggregating household sensitivity to monetary policy by expenditure category, ” bank of canada staff analytical note no. 2018 - 32 ( october 2018 ). looking ahead going forward, our primary focus will be to judge how monetary policy is working to slow demand, how fast supply challenges are resolved, and most importantly, how both inflation and inflation expectations respond. let me discuss each in turn. on the demand side, we ’ ll be keeping a close eye on how global developments and commodity prices affect our exports and business investment as well as how this translates into pricing decisions. as higher inflation and interest rates constrain household budgets, consumer spending should moderate in both goods and services. however, we know canadians have accumulated extra savings during the pandemic, so there is a risk that consumer spending has more momentum than we expect, making inflation more persistent. as labour demand eases from excessive levels, pressure on wages and prices — and therefore inflation — should also recede. and of course, we will continue to monitor the adjustment in housing activity and prices. on the supply side, unexpected global events could further disrupt supply and push prices up even more. we ’ ll be watching to see if supply disruptions are improving, especially in hard - hit sectors such as motor vehicles. will improvements to global supply bottlenecks continue? and how quickly will this translate into easing of supply constraints and lower costs for canadian firms? similarly, the bank will continue to monitor a broad set of indicators to see if labour shortages are subsiding. finally, as demand and supply come back into balance, we will examine how inflation and inflation expectations respond. this includes looking at the nearterm momentum, in particular that of our measures of core inflation, to assess how broad and entrenched pricing pressures are. meanwhile, survey results will help us see if the short - term inflation expectations of consumers and firms are coming back down. this will be an important sign that monetary policy is working and that canadians are beginning to feel some relief. given the lag between changes to interest rates and their impact on inflation — and

you that the digital economy is a promising way to raise trend growth and overall living standards. we cannot be satisfied, though, if some of the potential gains are left on the table, because many people will be left behind and important markets will be virtually uncontestable. it does not have to be this way if we choose a road for policy that effectively manages the 5 / 7 bis central bankers'speeches downsides of innovation without stifling it. of all the areas where we could develop and implement a better strategy, here are my top three : ( i ) develop a dynamic workforce with the skills to match the jobs, and encourage more labour force participation ; ( ii ) keep market power in check, particularly the power that comes from control of consumer data, to encourage competition and limit monopoly profits ; and ( iii ) manage the growing operational risks associated with the digital services that are provided by a concentrated set of firms to systemically important financial institutions. we will need to judge wisely when it is best to use public policy tools to manage risks and when to let private enterprise work its magic. we ’ ll need to work together and in the field to inform these judgments. i am confident that, together, the g7 will show leadership and will build with the private sector a shared sense of responsibility for the future. i would like to thank gurnain k. pasricha, lori rennison and eric santor for their help in preparing this speech. 1 the data for this calculation are taken from m. roser and e. ortiz - ospina, global extreme poverty ( 2018 ). poverty is defined as a consumption level below int $ 1. 90 per day, adjusting for price differences and inflation. 2 see international monetary fund, world economic outlook, chapter 3, “ understanding the downward trend in labor income shares, ” april 2017 ; and g. michaels, a. natraj and j. van reenen, “ has ict polarized skill demand? evidence from eleven countries over twenty - five years, ” review of economics and statistics 96, no. 1 ( march 2014 ) : 60 – 77. 3 according to mckinsey & company, 46 per cent of tasks could be automated in the united states using current technology. in canada, the share is slightly lower ( 42 per cent ). see c. lamb, “ the talented mr. robot : the impact of automation on canada ’ s workforce, ” brookfield institute, june 2016. 4 data