across the economy. what is more, government measures are helping people remain attached to their jobs. this will be absolutely critical for supporting the recovery. finally, as i noted in this speech, there are clear signs that credit is flowing and the financial system is working well. this will be another key piece underlying the strength of the recovery. despite the positive signs, though, many risks and uncertainties remain. a lot will depend on whether we as a country are successful in managing the risk of possible future waves of covid19, and the pace at which containment measures are lifted. this applies to the global economy as well as canada ’ s. we will be paying close attention to how the pandemic is affecting growth and demand in key markets for canadian exports. as we get more data, we will have a better sense of the impact of the containment measures. these data will also help us answer a number of important questions. what ’ s going to happen with business and consumer confidence? will the pandemic lead to lasting changes in household saving and spending habits? how many companies will be unable to reopen their doors, and how many job losses will be permanent? how quickly will those people who lose their jobs be able to find other work? how will companies adjust or rebuild global supply chains? and so on. ultimately, the stance of the bank ’ s monetary policy will depend a lot on what happens to the balance between what the economy can supply and what people demand, because this will affect the outlook for inflation. it is possible, for example, that economic supply could recover faster than demand if businesses reopen quickly but consumers remain cautious. in the lead up to our july mpr, and beyond, it will be key for us to understand how the pandemic has affected demand, employment and the economy ’ s capacity to produce goods and services. as market function improves and containment measures ease, the bank ’ s focus will shift to supporting the resumption of growth in output and employment. the bank maintains its commitment to continue large - scale asset purchases until the economic recovery is well underway. any further policy actions would be calibrated to provide the necessary degree of monetary policy accommodation required to achieve the inflation target. thank you very much for your attention. now, i would be happy to respond to some questions. i would like to thank tamara gomes for her help in preparing this speech. 1 g. zhao, “ confidence, bond risks, and equity returns, ”

david dodge : bank of canadaa€™s views on the canadain economy and its monetary policy objective opening statement by mr david dodge, governor of the bank of canada, to the house of commons standing committee on finance, ottawa, 1 may 2007. * * * good morning, mr. chairman and members of the committee. we appreciate the opportunity to meet with your committee, which we usually do twice a year, following the release of our monetary policy report. we believe that these meetings help us to keep members of parliament and, through you, all canadians, informed of the bank's views on the economy and about the objective of monetary policy and the actions we take to achieve it. when paul and i appeared before the finance committee last october, we noted then that the outlook for growth in the canadian economy had been revised down slightly from earlier expectations. in our latest monetary policy report, which we released last thursday, we noted that canada's economic growth did indeed slow, but recently, inflation has been higher than expected. after considering the full range of indicators, the bank now judges that the canadian economy was operating just above its production capacity in the first quarter of this year. we expect that, over the projection horizon, domestic demand will continue to be the main driver of growth in canada. with the u. s. slowdown now expected to be somewhat more prolonged than previously projected, net exports should exert a slightly greater drag on canada's growth in 2007. the canadian economy is now projected to grow by 2. 2 per cent in 2007 and 2. 7 per cent in both 2008 and 2009. this would return the economy to its production capacity in the second half of 2007 and keep it there through 2008 and 2009. core inflation should remain slightly above 2 per cent over the coming months, given pressures on capacity and the impact of higher core food prices. but with the economy projected to return to its production capacity in the second half of this year and with further easing of pressures from housing prices, upward pressure on core inflation is expected to moderate, bringing the core inflation rate back to 2 per cent by the end of 2007. total cpi inflation is projected to rise above the 2 per cent inflation target in the second half of this year, peaking below 3 per cent near the end of 2007 before returning to the target by mid - 2008. we at the bank continue to judge that the risks to our inflation projection are roughly balanced, although there is now a slight tilt to the upside