"We make monetary policy in the real world, where shocks are a fact of life," Mr. Carney said in the text of a speech delivered to the Board of Trade of Metropolitan Montreal.

"That is why the bank responds with a flexible approach, taking decisions guided by considered analysis and informed judgment rather than mechanical rules."

Mr. Carney's comments follow a recent five-year recommitment by the central bank and the Finance Department to a so-called "inflation-targeting regime," first adopted in 1991, as the main tool for guiding the economy.

"It is our job to anticipate potential shocks, analyze their impact on economic activity and inflation in Canada, and set monetary policy consistent with achieving the [central bank's] 2% inflation target over time," he said.

"This ultimately remains the best contribution that monetary policy can make to the economic well-being of Canadians."

The deteriorating state of the global economy has forced Canada to lower its own growth estimates and push back its timetable for eliminating the government's budget deficit amid threatening signs of economic and financial instability in Europe and elsewhere.

Concerns over Europe's debt crisis were heightened earlier Wednesday when China said its purchasing managers' index declined in November, pointing to a sharp contraction in the manufacturing sector of the world's second-largest economy.

Meanwhile, in Germany, the economic engine of Europe, fears grew that the eurozone debt contagion was spreading to that country after a disappointing auction of German bonds.

"The global economic outlook has weakened considerably and financial market volatility has increased, owing in particular to the ongoing European sovereign debt crisis," Mr. Carney said.

"European authorities have announced important plans to provide time to re-found their monetary union, but acute strains persist. At this point, the crisis appears barely contained."

The Bank of Canada's key interest rate has been sitting at 1% since September 2010, as policymakers have attempted to ward off another recession by encouraging businesses and consumers to pump more money into the economy.

At the same time, the central bank has maintained its key goal of ensuring price stability. On Wednesday, Mr. Carney reiterated that the bank will keep its key rate at the current level.

"In this environment, the bank judges it appropriate to maintain the considerable monetary stimulus in place."

Last Friday, Statistics Canada reported the annual rate of inflation eased to 2.9% in October from 3.2% the previous month. Still, that marked the 11th straight month overall inflation was above 2%, the Bank of Canada's target within a range of 1% to 3%.

The core inflation rate, which factors out volatile items including some food and energy products, now stands at 2.1%, down from 2.2% in September.

Mr. Carney said inflation is now "near the top" of the bank's target range, suggesting economic growth could be slightly stronger than anticipated.