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It has been a difficult year. The financial turmoil that began mid-2007 deteriorated into a full-blown global financial crisis through 2008. While the resilience and soundness of the Canadian financial system were in many respects exceptional, the scale of the financial crisis and the subsequent global recession had an increasing impact by year’s end on our financial system and our economy.

The outlook for the global economy has deteriorated significantly since the October Monetary Policy Report. The financial crisis intensified last autumn and spilled over into an already weak global economy, which, in turn, put further strains on the financial system.

Erratum: In Table 1 Interest Rates, the column "Estimated variable mortgage rate" should read 5.65 per cent for 4 December 2007 not 5.25.

Business sentiment has deteriorated markedly since the autumn survey, as the effects of the international financial crisis and the weak global economy intensified and spread to domestic demand. Almost all indicators are at their lowest level since the survey began in 1997.

Cover page

Chargex

The artefacts on the cover are part of the National Currency Collection of the Bank of Canada.

Photography by Gord Carter