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Quarterly Financial Report - Second Quarter, 2011 - For the period ended 30 June 2011

This special issue, “Real-Financial Linkages,” examines the Bank’s research using theoretical and empirical models to improve its understanding of the linkages between financial and macroeconomic developments in the wake of the recent global financial crisis.

The Canadian economy is projected to expand by 2.8 per cent in 2011, 2.6 per cent in 2012, and 2.1 per cent in 2013, returning to capacity in the middle of 2012. Total CPI inflation is expected to return to the 2 per cent target by the middle of 2012.

The survey results point to an overall net easing in business-lending conditions. The balance of opinion regarding both price and non-price lending conditions showed the greatest degree of consensus on easing since the survey began in 1999.

Businesses remain positive about the outlook for the next 12 months, despite more modest expectations for U.S. economic growth. Indicators of future sales and investment are moderately higher, and intentions to hire have become more widespread.

In this issue of the Financial System Review, the Bank of Canada’s Governing Council judges that, although the Canadian finan­cial system is currently on a sound footing, risks to its stability remain elevated and have edged higher since December 2010.

In 2010, the economic recovery became firmly entrenched. The Bank’s Annual Report provides a Message from the Governor, highlights key achievements over the year, describes the Bank’s corporate governance, presents its financial statements, and discusses financial results.