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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.

Since the last Report, the Canadian economy has advanced broadly in line with expectations.

The Canadian economy continues to grow at a solid pace, consistent with the Bank’s outlook in the January Monetary Policy Report Update.

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

Multi-stage production is widely recognized as an important feature of the modern global economy. This feature has been incorporated into many state-of-the-art quantitative trade models, and has been shown to deliver significant additional gains from international trade.

There have been a number of significant economic and financial developments since the time of the July Monetary Policy Report Update.

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.

The present paper shows that, everything else equal, some transactions to transfer portfolio credit risk to third-party investors increase the insolvency risk of banks. This is particularly likely if a bank sells the senior tranche and retains a sufficiently large first-loss position.

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.

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