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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.

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.

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

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.

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

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.

This paper studies the effects of financial development, taking into account both formal and informal financing. Using cross-country firm-level data, we document that informal financing is utilized more by rich countries than poor countries.

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

ToTEM III is the most recent generation of the Bank of Canada’s main dynamic stochastic general equilibrium model for projection and policy analysis. The model helps Bank staff tell clear and coherent stories about the Canadian economy’s current state and future evolution.

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.