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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.

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.

With inflation remaining low for the sixth consecutive year, the Canadian economy recorded a strong expansion of about 4 per cent through 1997.

We develop a principal-agent model of cyber-attacking with fee-paying clients who delegate security decisions to financial platforms. We derive testable implications about clients’ vulnerability to cyber attacks and about the fees charged.

In our analysis of the US productivity slowdown in the 1970s and 2000s, we find that a significant portion of this deceleration can be attributed to a lack of improvement in allocative efficiency across sectors. Our analysis further identifies increased sector-level volatility as a major contributor to this lack of improvement in allocative efficiency.

In 1996 inflation remained within the Bank’s target range but was subject to downward pressure. The low rate of inflation contributed to a major easing in monetary conditions, and interest rates reached their lowest level in 30 years.

At the Bank of Canada, we have worked hard over the past several years to define our goals and our methods for achieving them. We have continued to strengthen our monetary policy framework, and we have established priorities in all areas of our operations to help us meet our strategic objectives. In 2002, the Bank set out a medium-term plan for the period 2003–05. The plan’s clearly defined policy frameworks and priorities were critical in guiding our analysis and our decisions in 2003, a year in which Canadians across the country were affected by a number of severe and unanticipated events.

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

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.

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