Monetary Policy Report – November 1999

Since the May Report, the international economic environment has continued to improve. Economic activity abroad grew faster than expected, while inflation in the major economies remained subdued. Japanese output increased sharply, following two years of severe recession. In Europe, growth picked up, and a number of the Asian economies that bore the brunt of the 1997–98 financial crisis have staged a remarkable recovery. The U.S. economy again showed surprisingly strong increases in spending and output, as well as low inflation, despite tight labour market conditions and high levels of economic activity.

Against this background, Canada’s exports grew strongly. Domestic spending also gained momentum, and the margin of unused capacity in the economy declined.