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This Report presents the Bank of Canada’s assessment of the trend of inflation in Canada and explains the monetary policy actions deemed necessary to keep inflation within the Bank’s inflation-control target range.

There have been a number of significant economic and financial developments since the time of the July Monetary Policy Report Update.

Since the May Report, the international economic environment has continued to improve. Economic activity abroad grew faster than expected, while inflation in the major economies remained subdued.

The Canadian economy continues to operate just above its full production capacity, and the near-term outlook for core inflation has moved slightly higher.

Canada’s inflation-control targets establish a specific medium-term objective for monetary policy.

The Canadian economy continues to adjust to major global developments.

The global economy has continued to grow at a robust pace since the July Monetary Policy Report Update.

We model non-bank entry into fixed-income markets and state-dependent liquidity. Non-bank financial institutions improve liquidity more during normal times than in stress. Banks may become less reliable to marginal clients, exacerbating the difference in liquidity between normal and stressed times. Central bank lending during stress may limit this harmful division.

Using the Bank of Canada's Currency Information Management Strategy, we analyze the network structure traced by a bank note’s travel in circulation and find that the denomination of the bank note is important in our potential understanding of the demand and use of cash.

Since the last Report, the Canadian economy has advanced broadly in line with expectations.