Monetary Policy Report Update - August 2001

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The Bank’s outlook for inflation and overall economic activity in Canada to the end of 2002 has not changed fundamentally from that presented in the May Monetary Policy Report. The pace of economic expansion, after falling below the economy’s growth potential in the first half of this year, is expected to begin to strengthen in the third and fourth quarters and to pick up further to slightly above potential growth in 2002.

Most of the factors supporting this outlook continue to be those discussed in the May Report—an expected strengthening in U.S. economic growth, substantial progress in adjusting inventory levels in key sectors of the economy, the easing that has taken place in domestic monetary conditions, and tax cuts boosting Canadian disposable incomes.