Monetary Policy Report Update - August 2000

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Information received since the last Monetary Policy Report continues to show solid economic growth in the United States, Europe, and the emerging markets. The Japanese economy has also shown signs of improvement. As the global economy continues to expand and oil producers maintain production quotas, the world price of crude oil and the North American price of natural gas have been higher than expected. In contrast, prices for most non-energy commodities have been below expectations.

In the United States, core inflation, which excludes energy and food prices, has continued to edge up. Recent data indicate that the pace of U.S. activity remains robust. However, there have been signs of slowing in interest-rate-sensitive sectors. Whether the slowing will be sufficient to reduce inflation pressures is not yet clear. Given the tight labour market, the balance of risks suggests continued upward pressure on U.S. core inflation.