Finance committee  Well, there's a price signal that's sent with higher borrowing costs, and we see the start of higher borrowing costs in fixed rate mortgages. On the margin, some people will not take out a mortgage at those levels, or not as large a mortgage, and that will slow it. It's not stopping lending; it's a reaction to supply and demand.

Finance committee  Thank you for your question. It is complex, but very relevant, given present market conditions. With regard to Canada, allow me to respond in English. The issue you're identifying--and I appreciate your acknowledgement of our inflation target--and the discipline that imposes on us in terms of the management of our monetary policy is such that this “easy out” on the fiscal side, if you will, or more broadly, is not likely to happen.

Finance committee  Thank you for the question. Thanks for reading my speech. It puts you in very select company.

Finance committee  There is a variety of factors. One of the points of that speech is that a variety of measures have been taken by a variety of governments over a number of years that have considerably improved the business environment in Canada. That runs the gamut from investments in primary research and improvements in labour market and other flexibilities, to infrastructure investment, and importantly, as you reference in the point of your question, to a fairly dramatic turnaround in business taxation in the country, and very importantly—and there are still some final measures coming through on this at the provincial level—on the marginal effect of tax rates on investment in the country.

Finance committee  But we have, in a summary measure or on a summary basis, an output gap that is still 2%—even after that surge in growth in the fourth quarter of last year and first quarter of this year. So we still have a fair degree of slack in the economy. These are not precise measures, but we've been pretty conservative in our estimate of that.

Finance committee  Yes.

Finance committee  It was credit easing. For example, the Federal Reserve, but also the Bank of England, would directly purchase bonds/credit securities in markets that were particularly distressed in an effort to get those markets restarted. The most dramatic example, if you will, or the largest example of that, is the Fed's purchase of a very large number of mortgage-backed securities in the United States.

Finance committee  No. What I meant in my remarks at the start, to be absolutely clear, was that what we have done to lessen the monetary stimulus is that the decision taken last Tuesday to remove the conditional commitment was lessening monetary stimulus in Canada.

Finance committee  No. It's a function of the rate of growth, the capacity of the economy, where we are relative to the potential of the economy. It's a function of other factors as well: the exchange rate pass-through and other things such as that.

Finance committee  There's a lot of slack in the economy. Some of that slack is starting to be taken up. In fact, this is typical growth, in many respects, for a recovery. On the pace of the recovery as a whole, though, given the severity of the recession, which was short but sharp, it's is not back at historic averages.

Finance committee  Firstly, with regard to our Canadian economic predictions, we underscored the fact that there was probably an advancement of household spending, that had a major impact on the final quarter of last year and the first quarter of this year. That was followed by a progressive slowdown of our level of activity in Canada.

Finance committee  Thank you for the question. This is a very important point. If you'll permit me, sir, to go back to this time last year, when we reached the zero lower bound or the effective zero lower bound--25 basis points--for technical reasons we couldn't see the interest rate going any lower than that.

Finance committee  Yes, that's the test. If you're asking me right now if sufficient progress has been made, the answer is no. These are issues that are being discussed. We need to come to agreement on them, but we have not yet come to agreement on them. The key date for this year is the November summit in Korea, and there's the run-up to that.

Finance committee  Yes, absolutely. You've put your finger on exactly the right issue. Just very briefly, the issue on why the tax, in our view, doesn't get to this externality issue is that by creating this fund...or one of the issues, as there are many.... You're creating a fund, so I, as a lender, a buyer of the bonds of this financial institution that ultimately benefits from the fund...so why is that not a quasi-sovereign obligation, given...?

Finance committee  I could probably be more precise with regard to the impact of the easing of the monetary policy. Since the beginning of 2008, the Bank of Canada has quickly reduced its key interest rate. At the end of the month of April 2009, we set it at its floor value and we introduced our conditional commitment.