Monetary Policy Report

The global economic outlook has been clouded by a high degree of uncertainty, accentuated most recently by the war in Iraq.

At the time of the October Monetary Policy Report, the Bank projected that core inflation would rise in the fourth quarter of 2002, reflecting a combination of one-off factors - including the rise in insurance premiums - and the “echo effect” from developments towards the end of 2001.

Over the past year, Canada’s economy has outperformed the economies of virtually all the other major industrial countries.

t the time of the April Monetary Policy Report, it was evident that a robust economic recovery was underway in Canada.

At the time of last November’s Monetary Policy Report, two issues dominated the analysis: the global economic slowdown and the fallout from the September terrorist attacks.

In the November Monetary Policy Report, the timing and extent of the recovery in economic activity in Canada this year was seen as depending crucially on geopolitical developments and on how quickly consumer and business confidence would return to normal.

Two major issues dominate the analysis and policy discussion in this Monetary Policy Report: the nature and extent of the global economic slowdown that began late last year and the consequences of the terrorist attacks in the United States.

The Bank’s outlook for inflation and overall economic activity in Canada to the end of 2002 has not changed fundamentally from that presented in the May Monetary Policy Report.

At the time of the November 2000 Monetary Policy Report, although signs of the anticipated slowing of the U.S. economy were becoming apparent, the momentum of the global economy was considered strong.

On 23 January, the Bank reduced the Bank Rate by one-quarter of one percentage point to 5 3/4 per cent.