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The last time I testified before this committee was in the spring of 2002, because we were unable to arrange our regular meeting last fall. You will recall that following the 11 September 2001 terrorist attacks in the United States, we quickly and aggressively cut our policy interest rate to shore up confidence and support domestic demand. By last spring, evidence had already started to build that demand was growing faster than the economy's production capacity.

Last week, we released our spring Monetary Policy Report, in which we discuss economic and financial trends in the context of Canada's inflation-control strategy. I last testified before this committee in October, following the release of our autumn Monetary Policy Report.

Since our October 2002 Monetary Policy Report, both core and total CPI inflation have been well above the 2 per cent inflation target. In this environment, inflation expectations have edged up.

It has not been an easy year. All of you have been running companies and making decisions under very uncertain conditions. You have had to deal with corporate and accounting issues. Markets have been volatile. And geopolitical events have shaken confidence.

Canada and Italy share many similar characteristics. We both belong to the G-7, and we are among the smaller members of that group. Our two economies vary greatly from region to region, both in terms of structure and strength.

It has become almost a cliché to point out that "Internet time moves faster than normal time." But I'm reminded of that observation as I accept this award - an award for achievement in a medium that barely existed ten years ago.

We are facing a time of great economic and political uncertainty. While economic activity is close to potential in Canada, most other countries are facing very weak demand and lacklustre economic prospects. And, of course, there is the overriding prospect of a war in Iraq.

I'll discuss what's happening to prices in the economy and how Canada's macroeconomic policy framework protects it from the risks of persistent inflation or deflation. Finally, I will update our outlook for the Canadian economy.

Core inflation has been higher than anticipated in recent months. This reflects not only a stronger-than-expected increase in premiums for auto and home insurance, but also some broadening of price pressures resulting from strong demand in the economy.

It's been a difficult year for many sectors of the Alberta economy. Certainly, the severe drought hurt many western farmers, and investment in the energy sector was held back by low oil and gas prices. In addition, the slump in the telecom sector has affected Calgary.