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In the April Monetary Policy Report, the Bank noted that inflation was well above its 2 per cent target and that short-term inflation expectations had edged up.

Since the October Monetary Policy Report, three developments have led the Bank of Canada to modify its outlook for economic growth and inflation in Canada.

The Canadian economy continues to adjust to developments in the global economy.

In an environment of continued high uncertainty, the global recession has intensified and become more synchronous since the Bank’s January Monetary Policy Report Update, with weaker-than-expected activity in all major economies.

Errata: The source for Chart 1 (on page 3) is Global Insight, not the Bank of Canada. As well, in chart 15 (on page18), the base year for the exchange rate index CERI excluding the U.S. dollar should read 1992=100, not 1997=100.

In the last half-year, the economic expansion in Canada has become well established, supported by low inflation, highly stimulative monetary conditions, and a strong U.S. economy.

This Report presents the Bank of Canada’s assessment of the trend of inflation in Canada and explains the monetary policy actions deemed necessary to keep inflation within the Bank’s inflation-control target range.

I am honoured to address members of the Canadian Association for Business Economics. My remarks today will focus on critical issues that the Bank of Canada has studied over the past four years and how this research will inform our work as we move forward post crisis.

The recent past has underscored the fact that, in finance and the economy, most things are interconnected on a global scale. Throughout its history, Canada has been powerfully affected by events elsewhere.

Discussion papers, setting out a proposed framework for implementing monetary policy in the LVTS environment, were published before the final report was issued in January 1999.

The global economy has continued to grow at a robust pace since the July Monetary Policy Report Update.