Industry committee  In terms of your question, again, the exchange rate is a price that is set in markets. A critical issue in certainly the conduct of monetary policy is to constantly ask, whatever level the Canadian dollar is trading at, why is it trading at that level? Going back to the very first question, we know that a number of factors can influence the exchange rate—movements in commodity prices, the impact on the Canadian economy of the U.S. economy and the weakness we've seen there—so it truly is a relative price.

Industry committee  The flip side of that, of course, is that if the Canadian dollar were viewed as trading above what you thought was reasonable, that would have negative consequences for the Canadian dollar and it would clearly be something we would have to take into consideration in setting monetary policy.

Industry committee  First, let me repeat what I said when I last appeared before this committee. As I said then, the latest report on the monetary policy of the Bank of Canada, issued in January, forecasts an annual growth rate of 0.5% for the first semester in the United States, which is very weak.

Industry committee  I cannot tell you what the decision will be. I can only emphasize the messages in our report on January's monetary policy.

Industry committee  The main factor for the Bank of Canada is the direct impact of the GST on the consumer price index, the CPI. We think that the impact of the drop in the GST on the IPC will be about 0.6%. The impact on the inflation rate will be the same, but only for one year. After one year, the effect of the price decrease will be eliminated and the inflation rate will be the same as it was before the GST was decreased.

Industry committee  The short answer to your question is that it is not the only factor. The exchange rate, as I mentioned before the committee the last time, is a relative price, in the sense that it's the price of the Canadian dollar relative to the U.S. dollar, or the Canadian dollar relative to the euro.

Industry committee  I'll ask John to pitch in here, because he's done quite a bit of research on these issues, but I think the general point is that these foreign exchange markets are very large—in the trillions of dollars. So at times, when you do see a transaction taking place in the market, it can have an impact on movements in exchange rates.

Industry committee  I personally don't like the word “decoupling” because it's too easy an out, in the following sense. You have quite a few factors at play currently in the global economy. If you look at it from the point of view of the Bank of Canada, our role is to look at all these factors at play and add them up in terms of the overall impact on the Canadian economy.

Industry committee  We would be happy to come back. I don't know whether next week will work, but this is important, so we would certainly be happy to make ourselves available to the committee.

Industry committee  Next week could be difficult, but we will aim to do it the week after.

Industry committee  The answer is in why the dollar is high. The dollar has moved up because with the demand for a big part of the products we produce and sell internationally the price has gone up. That's a natural response in a market economy. That movement of the dollar is helping us maintain overall balance in the Canadian economy.

Industry committee  It was a good question, but the answer will have to wait.

Industry committee  I come from St. Catharines.

Industry committee  The important point here is that monetary policy does operate with long and--as Milton Friedman said--variable lags. With monetary policy you have to look ahead, as far as the trends that are at play in the Canadian economy. You have to look out one to two years in terms of the actions you take today influencing the economy through that period.

Industry committee  Those numbers are available. Statistics Canada actually calculates migration numbers from one region to another. We don't have those with us, but we can certainly provide them to the committee. This comes back to the theme of flexibility and adaptability in the Canadian economy.