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

Growth in the Canadian economy has been essentially in line with the expectations set out in the Bank’s January Monetary Policy Report Update.

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

The Canadian economy continued to expand robustly in 2000 while inflation remained low.

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

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.

How do banks' interconnections in the euro area contribute to the vulnerability of the banking system? We study both the direct interconnections (banks lend to each other) and the indirect interconnections (banks are exposed to similar sectors of the economy). These complex linkages make the banking system more vulnerable to contagion risks.

In 2005, the Bank of Canada celebrated its 70th anniversary. Since the Bank opened its doors in March 1935, it has evolved into a national institution at the heart of Canada’s economy. We had a lot to celebrate in 2005—particularly our progress over the past 70 yearsand our continuing contribution to the economic and financial well-being of Canadians.

The year that just passed posed many challenges for all Canadians. The slowdown in the global economy became more pronounced as the year went on, and this affected households, businesses, and governments alike. The tragedy of 11 September compounded the economic difficulties and issues facing us all. Through this period of rapidly changing circumstances, the Bank met its responsibilities by responding quickly and vigorously to events in order to underpin confidence and support the economy.

The global economy has been unfolding largely as expected, and prospects for continued robust growth are quite favourable, especially over the near term.