Today the Bank of Canada published its Monetary Policy Report. In it, we said that we see robust growth resuming in North America. The level of production in the Canadian economy should return to full capacity in the second half of 2003. We also said that inflation should be at the Bank's 2 per cent target by about the end of next year.

There are risks to this outlook. Given the amount of monetary stimulus in place, growth could be even stronger than projected. But if a greater-than-assumed share of recent consumer spending was borrowed from the future, it is also possible that household spending may be weaker than expected. There is still uncertainty about the timing and strength of the pickup in business investment and exports, mainly because global business confidence is still fragile. And while geopolitical risks to the world economic outlook have declined since September, recent political developments in the Middle East may continue to affect crude oil prices. And this could have repercussions for the global economy.

Given this background and the risks in both directions, the task for monetary policy will be to gauge the strength of the economy as it approaches its capacity to produce, along with the implications for future inflation. This means reducing, in a timely and measured manner, the substantial amount of monetary stimulus now in place. The aim is to keep inflation close to our 2 per cent target, which will help to sustain economic growth at full capacity over the medium term.