will need to ensure that our workers have the skills and receive the training they require to take advantage of productivity - enhancing technology. and we will need to improve business organization and practices, to fully exploit the potential of new technologies, and to minimize any barriers to their application in the workplace. raising productivity will also require a major effort to ensure that our microeconomic policies facilitate innovation and higher productivity in both the private and public sectors in canada. in thinking about our macroeconomic policies, we can ’ t assume that all the shocks are behind us. we have seen the buildup of economic imbalances recently, with large current account surpluses in asia and a large current account deficit in the united states. and fiscal imbalances are growing in europe and the united states. so how can the bank of canada help to prepare for the challenges ahead? most importantly, we must stick with the monetary policy framework that we built in the 1990s. that means keeping our commitment to low, stable, and predictable inflation. and it means that our floating exchange rate will continue to be an important part of our monetary policy framework. this framework will continue to help the economy adjust to changing economic circumstances, both at home and abroad. of course, exchange rates don ’ t always move as smoothly as desired or expected. still, let me repeat what i have said many times before : having a floating exchange rate to facilitate economic adjustments is by far the best option for the canadian economy. recent economic developments let me now turn to the current economic situation, starting with the outlook for inflation. as we noted in our october monetary policy report, we expect that canada ’ s inflation rate will fall over the next few months. the core rate of inflation - a measure that removes the eight most volatile components of the consumer price index - will likely move down close to the bottom of our 1 to 3 per cent inflation - control range early next year, before starting to move back up towards 2 per cent. on the bank ’ s latest fixed announcement date last week, we decided to leave our key policy rate unchanged. in doing so, we noted a few developments that have altered our outlook since we published the monetary policy report. let me review some of them. at the end of november, statistics canada released its national accounts data for the third quarter. these data showed that canada ’ s economy had grown at an annualized rate of just 1. 1 per cent in the third quarter, a rate that was well below expectations. what ’ s

mark carney : bank of canada ’ s economic overview and monetary policy stance opening statement by mr mark carney, governor of the bank of canada, at the house of commons standing committee on finance, ottawa, 27 october 2009. * * * good morning, mr. chairman and committee members. paul and i are pleased to appear before this committee today to discuss the bank of canada's views on the economy and our monetary policy stance. while conditions in the canadian economy have improved since we met with you in february and april, many of the basic challenges remain. before paul and i take your questions, i would like to give you some of the highlights from our latest monetary policy report, released last week. • recent indicators point to the start of a global recovery. economic and financial developments have been somewhat more favourable than the bank had expected in july, although significant fragilities remain. • in canada, as expected, a recovery in economic activity is also under way, following three consecutive quarters of sharp contraction. this resumption of growth is supported by monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, and stronger business and consumer confidence. • however, heightened volatility and persistent strength in the canadian dollar are working to slow growth and subdue inflation pressures. the current strength in the dollar is expected, over time, to more than fully offset the favourable developments since july. • given all these factors, the bank now projects that, relative to our july monetary policy report, the composition of aggregate demand will shift further towards final domestic demand and away from net exports. • we now expect growth to average slightly lower over the balance of the projection period. the bank projects that the canadian economy will contract by 2. 4 per cent this year and then grow by 3. 0 per cent in 2010 and 3. 3 per cent in 2011. this projected recovery will be somewhat more modest than the average of previous cycles. • total cpi inflation declined to a trough of - 0. 9 per cent in the third quarter, reflecting large year - on - year drops in energy prices. • total cpi inflation should rise to 1. 0 per cent this quarter, while the core rate of inflation is projected to reach its trough of 1. 4 per cent during the same period. • owing to the substantial excess supply that has emerged in the economy, the bank expects both core and total inflation to return to the 2 per cent target in the third quarter of 2011, one quarter