Monetary Policy Report Update - January 2005

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The adjustment of the Canadian economy to major global developments continues to shape the economic outlook. These developments include solid world economic growth; a realignment of world currencies, including the Canadian dollar; movements in the prices of crude oil and non-energy commodities; and the growing global presence of China and India. Canadian monetary policy facilitates the adjustment process by aiming to keep inflation at its 2 per cent target and the economy operating near its production capacity.

The near-term outlook for the global economy is a touch weaker than projected in the October Monetary Policy Report, but there is now greater confidence in the momentum of the U.S. economy in 2005.