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Growth in Canada’s economy is expected to reach 1.4 per cent this year and accelerate to 2.4 per cent in 2017.

The Bank expects Canada’s economy to grow by almost 4 percent on average in 2021 and 2022, following a decline of about 5 ½ percent in 2020.

There have been positive developments in the global financial system since the June Financial System Review, in part reflecting some encouraging signs about the global economy. At the same time, significant vulnerabilities remain. The Governing Council judges that the overall risk to the stability of Canada’s financial system has decreased from “high” to “elevated” over the past six months.

This issue features four articles that present research and analysis by Bank staff. The first focuses on reforming the international monetary system; the second on the role of collateral and haircut policy in central bank lending; and the third on the extraction of information from the Business Outlook Survey using principal-component analysis. The fourth reviews studies that model the counterfeiting of bank notes.

Growth in the global economy began to slow in the fourth quarter of 2007 and the first quarter of 2008. This reflected the effects of the slowdown in the U.S. economy and ongoing dislocations in global financial markets.

Globalization is the opportunity and the challenge of our age. It has the potential to lift billions out of poverty, vastly expand economic prospects, and develop a more diverse and resilient global economy.

This note analyzes different economic models of a central bank digital currency (CBDC) ecosystem where the central bank chooses different levels of market involvement and usage of policy levers. The analysis suggests that there are trade-offs between the costs to the central bank and its ability to achieve policy goals like universal access.

In recent months, much has been said, and written, about developments in financial markets. The turbulence in global credit markets, which had its roots in developments in the market for subprime mortgages here in the United States, has been a focal point of attention for market participants and policy-makers around the world.

This issue of the Financial System Review reflects the Bank’s judgment that household indebtedness and housing market imbalances–the most important vulnerabilities for the Canadian financial system–have moved higher over the past six months. However, the financial system remains resilient, and macroeconomic conditions continue to improve. Other vulnerabilities discussed in this FSR are fragile fixed-income market liquidity and the capacity of an interconnected financial system to mitigate cyber threats.

Inflation in Canada remains high but should come down quickly to around 3% in the middle of this year because of lower energy prices, improved supply chains and restrictive monetary policy. The Bank projects that inflation will reach the 2% target by the end of 2024.