Monetary Policy Report Update – January 2009

The outlook for the global economy has deteriorated significantly since the October Monetary Policy Report. The financial crisis intensified last autumn and spilled over into an already weak global economy, which, in turn, put further strains on the financial system. This dynamic contributed to heightened uncertainty and a collapse of confidence, compounding the situation. The major advanced economies, including Canada, are now in recession, and emerging market countries are increasingly affected. In response to the sudden downturn in global demand, there have been further declines in commodity prices, especially for energy, and global inflationary pressures have abated rapidly. Policy-makers have responded to the fall in global economic activity with bold and concerted policy actions.

Erratum: In Table 1 Interest Rates, the column "Estimated variable mortgage rate" should read 5.65 per cent for 4 December 2007 not 5.25.