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Growth in the global economy began to slow in the fourth quarter of 2007 and the first quarter of 2008. This reflected the effects of the slowdown in the U.S. economy and ongoing dislocations in global financial markets.

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 adjust to major global developments.

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.

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

The exponential family, relative entropy, and distortion are methods of transforming probability distributions. We establish a link between those methods, focusing on the relation between relative entropy and distortion.

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

Exporters frequently change their market destinations. This paper introduces a new approach to identifying the drivers of these decisions over time. Analysis of customs data from China and the UK shows most changes are driven by demand rather than supply-related shocks.

The five articles in this issue present research and analysis by Bank staff covering a variety of topics: the growth of Canadian-dollar-denominated assets in official foreign reserves; the emergence of platform-based digital currencies; methods of forecasting the real price of oil; measures of uncertainty in monetary policy; and the recent performance of the labour market in Canada and the United States.

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.