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

This Report outlines recent developments in the Canadian economy that affect the rate of inflation and provides an account of the measures taken by the Bank of Canada to control inflation.

At the time of last November’s Monetary Policy Report, two issues dominated the analysis: the global economic slowdown and the fallout from the September terrorist attacks.

In the last half-year, the economic expansion in Canada has become well established, supported by low inflation, highly stimulative monetary conditions, and a strong U.S. economy.

The Canadian economy continues to adjust to developments in the global economy.

During the past six months, global economic uncertainties have intensified, largely as a result of developments in emerging-market economies.

In the April Monetary Policy Report, the Bank noted that inflation was well above its 2 per cent target and that short-term inflation expectations had edged up.

Over the past year, Canada’s economy has outperformed the economies of virtually all the other major industrial countries.

At the time of the November 2000 Monetary Policy Report, although signs of the anticipated slowing of the U.S. economy were becoming apparent, the momentum of the global economy was considered strong.

Six months ago, at the time of the last Monetary Policy Report, the global economic and financial environment was volatile and highly uncertain because of the adverse situation in Asia and the fallout from the Russian debt moratorium.