risky assets triggered the typical features of a financial panic. we saw a spike in volatility driven by uncertainty and a rapid fall across many asset prices. this drove a flight to safety and cash hoarding, as financial institutions - 9were reluctant to lend to one another and withdrew from market making. if these forces had been left unchecked, canadian businesses and households could have faced a severe credit crunch. swift and aggressive policy was therefore needed to restore market functioning. starting in mid - march, the bank expanded its funding to financial institutions and launched various asset purchase programs, all to address problems with market functioning. our asset purchases serve a dual purpose. first, the purchases themselves help support the functioning of the markets in which we are buying. second, we carry out these purchases by expanding financial institutions ’ deposits at the bank of canada, which helps satisfy the demand for additional liquidity under turbulent conditions. as a result of these operations, our balance sheet has already expanded by about $ 300 billion — more than tripling its size from the end of january. details of these programs and how they work are presented in our latest financial system review, published on may 14. two months on, markets are functioning noticeably better. canadian companies have been able to increase their borrowing substantially — which is appropriate given their need to ride out their loss of revenues during the shutdown. households likewise have been able to borrow more, partly reflecting the fact that some mortgage payments have been postponed. while these are encouraging signs, new challenges are in store. in particular, we are seeing a sizable increase in financing needs by federal and provincial governments, coinciding with the heightened credit needs of the private sector. in response, we have temporarily stepped up our purchases of federal government debt and launched new facilities for purchasing provincial and corporate debt. this is so that these markets continue to function so that borrowers can continue to access the credit they need to get through this difficult period. managing risks to inflation this brings me to the direction of monetary policy. for over 25 years now, the bank of canada ’ s monetary policy has been guided by our 2 percent inflation target. this period has included some turbulent times, and inflation has nonetheless averaged close to that target. inflation was near 2 percent before the global shutdown started, and the economy was operating close to potential. the inflation target remains our objective, and in the period ahead we will continue to manage the risk that inflation could persistently diverge from target in either direction.

david dodge : monetary policy report update opening statement by mr david dodge, governor of the bank of canada, at a press conference following the release of the monetary policy report update, ottawa, ontario, 13 july 2006. * * * today, we released our july monetary policy report update, which discusses current economic and financial trends in the context of canada's inflation - control strategy. overall, the bank's outlook for growth and inflation in canada is largely unchanged from that in its april monetary policy report ( mpr ). growth in the first half of 2006 appears to have been a little stronger than projected, and the canadian dollar has traded in a higher range than was envisaged in the april mpr. the economy is currently judged to be operating just above its production capacity. growth in 2007 - 08 is expected to be a little weaker than was anticipated in the april mpr, owing primarily to the lagged effects of the higher canadian dollar. with some anticipated moderation in u. s. growth, combined with past interest rate and exchange rate increases, the canadian economy is projected to return to its production capacity by the end of 2008. the bank projects economic growth of 3. 2 per cent in 2006, 2. 9 per cent in 2007, and 2. 8 per cent in 2008. total cpi inflation is expected to average just over 1 1 / 2 per cent from mid - 2006 to mid - 2007 with the reduction in the gst lowering the inflation rate by 0. 6 percentage points over this period - and then return to the 2 per cent target and remain there through the projection period. core inflation should also remain at about 2 per cent through to the end of 2008. there are important upside and downside risks to the bank's projection. but the bank continues to judge that these risks are roughly balanced, with a small tilt to the downside later in the projection period because of the possibility of a disorderly resolution of global imbalances. on 11 july, the bank kept its target for the overnight rate unchanged at 4. 25 per cent. the current level of this policy rate is judged, at this time, to be consistent with achieving the inflation target over the medium term. the bank will continue to monitor global and domestic economic and financial developments, including adjustments in the canadian economy, relative to its projection.