Over the past year, Canada’s economy has outperformed the economies of virtually all the other major industrial countries. The Canadian economy has been expanding at a rate above its growth potential, with levels of activity now close to full production capacity, and there have been remarkable gains in employment. Core inflation has averaged somewhat higher than the Bank of Canada’s 2 per cent target. In these circumstances, monetary policy has been directed towards reducing the substantial amount of monetary stimulus in a timely and measured way.

While our domestic economy has enjoyed strong growth, the global economic recovery has been proceeding at a slower pace than anticipated. Since the last Monetary Policy Report, economic, financial, and geopolitical developments have contributed to a more moderate and less certain outlook for global economic growth. These developments include further adjustments in response to past excesses in capital spending, declines in equity prices, rising risk premiums, concerns about corporate governance and financial reporting, geopolitical developments in the Middle East, and concerns about the situation in several Latin American countries.

MPR Summary - October 2002