market operations. furthermore, this widening could occur without necessarily invoking the pre - existing power to do so in circumstances where the governor declares a situation of severe and unusual stress on a financial market or financial system. at times, the bank also carried out sale and repurchase agreements. assumed. as well, we stated that there could be a more prolonged slowdown in the u. s. economy. given the situation, we lowered our policy rate by 25 basis points. in our 4 march policy rate announcement, we indicated that deterioration in economic and financial conditions in the united states could be expected to have significant spillover effects on the global economy. we also said that those developments suggested that important downside risks to canada's economic outlook, which were identified in the january update, were materializing and, in some respects, intensifying. in response, we lowered our policy rate by 50 basis points to 3. 50 per cent, and said that further monetary stimulus is likely to be required in the near term to keep aggregate supply and demand in balance and to achieve the 2 per cent inflation target over the medium term. conclusion i've talked about some of the causes of, and the lessons learned from, the recent financial market turbulence. in particular, as i mentioned at the outset of my remarks, we at the bank of canada are continuing our analysis of the unusually wide credit spreads that we've been seeing and what these mean for the stability of the financial system and, potentially, for the economy, inflation, and monetary policy. it's very clear that these unusual spreads, and the financial market upheaval that exacerbated these spreads, will continue to have an impact for some time to come. we do not know just when or how this turmoil will ultimately be resolved. you can be confident, however, that our focus at the bank of canada will remain on our core functions of supporting financial stability, and maintaining consumer price inflation at our 2 per cent target. in this way, we will continue to maintain an anchor for the economy through what will continue to be very interesting times. thank you very much for your attention, and now i'll be happy to take your questions.

bank of canada last observation : 2022q2 against this backdrop, a lot of discussion involves what monetary policy should do to minimize the risk that inflation expectations will drift persistently above our target. this is a process known as “ de - anchoring, ” and it can be associated with the self - fulfilling wage - price spirals that i warned against in my last speech. 7 to avoid this and bring inflation sustainably back to target, some have suggested that policy - makers may need to engineer a substantial slowdown — or even a recession. 7 see p. beaudry, “ economic progress report : navigating a high inflation environment ” ( speech to gatineau chamber of commerce, gatineau, quebec, june 2, 2022 ). - 9i want to address these concerns. the best strategy for responding to high inflation — and, most importantly, for avoiding de - anchoring — depends partly on how people form their inflation expectations. so let me start with two very different theories of expectation formation and what they mean for the disinflation process. the first theory assumes that inflation expectations are backward - looking — or what economists call “ adaptive. ” this means that households and businesses base their inflation expectations on past inflation, without trying to forecast how the future might differ from the past. essentially, this theory says that people don ’ t believe anything the central bank may say about inflation until they ’ ve seen it for themselves. an adaptive - expectations view implies that when inflation is high, inflation expectations will drift up, and central banks can ’ t rely on simple communication about future policy to bring them back down. instead, policy - makers must engineer a period of sufficient economic slack so that inflation falls, and these lower inflation outcomes then feed back into lower expectations over time. researchers sometimes liken this to a process of earning credibility. this is because what eventually brings realized and expected inflation sustainably back to target is policy - makers showing that they ’ re willing to tolerate a sizable downturn to get there. the second theory is the polar opposite — that expectations are what economists call “ rational. ” this theory assumes that firms and households are forwardlooking and understand the economy and how monetary policy affects it. in particular, businesses and households are assumed to be capable of the mental gymnastics needed to process incoming data and assess their likely implications for future outcomes. under this rational - expectations view, people ’ s understanding that appropriate policy choices will eventually bring inflation back to target