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Are based on actual mid-market closing yields of the selected long-term bond issue. At times, some of the change in the yield that occurs over a reporting period may reflect switching to a more current issue. Yields for Real Return Bonds are mid-market closing yields for the last Wednesday of the month and are for the 4.25% bond maturing 1 December 2026. Prior to 7 December 1995, the benchmark bond was 4.25% maturing 1 December 2021.
Excludes eight of the most volatile components from the CPI as well as the effect of indirect taxes on the remaining components.
Adjusts each CPI basket weight by a factor that is inversely proportional to the component's variability and is adjusted to exclude the effect of changes in indirect taxes.
Are defined as aggregate labour income per unit of output (real GDP at factor cost).
Industrial product price index for finished products comprises the prices of finished goods that are most commonly used for immediate consumption or for capital investment.
Data for average hourly earnings of permanent workers are from Statistics Canada's Labour Force Information (Catalogue 71-001).
(from Monetary Policy Report, Technical Box 3, November 2000)
Potential output is the sustainable level of goods and services that the economy can produce without adding to inflationary pressures. Because potential output is not directly observable, it must be estimated. At the Bank, estimates of potential output are constantly updated on the basis of new data and results of ongoing research that attempts to identify trends in the determinants of potential output.
The most recent update of the Bank’s conventional measure of potential output provides a more optimistic assessment of the economy’s production capacity than was given in the May Report. The updated measure suggests that the economy was likely just below production capacity at the end of 1999. This upward revision to the level of potential output comes from a higher assessment of the trends in both labour availability and labour productivity growth in light of revised GDP data and recent developments in wage and price inflation.
The reassessment of the historical trend in labour availability partly reflects the strong rebound in the labour market since 1997, which has occurred without generating significant cost pressures. In particular, estimates of trend participation rates for youth and older workers were revised upwards in light of the stronger-than-anticipated rebound in labour force participation rates for these groups. Structural reforms in labour markets have also likely increased labour availability. In addition, a review of the recent growth in labour productivity suggests that its trend has been higher than previously estimated. However, the rebound in productivity growth remains within a normal range of variation.
The higher trends in the growth of labour availability and labour productivity, when combined with continued strong capital investment, raise the conventional projection for the growth rate of potential output in 2000, and over the next several years, to the 2.75 to 3.25 per cent range. This is higher than the 2.5 to 3.0 per cent range given in the May Report.
The conventional measure of potential output will continue to be updated as new information becomes available. Nevertheless, because of its reliance on historical data, the conventional measure adjusts to shifts in underlying trends with a lag. At a time of rapid technological change, this imparts an upside risk to conventional estimates of potential output. Judgments on the level of potential output relative to actual GDP must therefore rely on a broader set of capacity indicators and measures of inflationary pressures.
Canada's Money Supply
Inflation expectations and Real Return Bonds
Bank of Canada Review, Summer 1996.
Statistical measures of the trend rate of inflation
Bank of Canada Review, Autumn 1997.
Recent developments in the monetary aggregates and their implications
Bank of Canada Review, Spring 1998.
Core Inflation
Technical Report, January 2001.