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The year 2007 was marked by sharply increased volatility in financial and foreign exchange markets, and a widening of credit spreads. Despite financial market turbulence, the Canadian economy continued to expand, and inflation remained close to our target of 2 per cent. In this, my final Annual Report message, I begin by reviewing the economic and financial developments and challenges of the past year. I then highlight seven important ongoing challenges faced by Canada and the Bank during my seven years as Governor.

Legislation, reports, plans, policies and other documents relating to the governance of the Bank.

The Bank of Canada today raised its Bank rate by ½ of one percentage point to 4 ½ per cent.

Economic growth and inflation in Canada in the first half of this year have been stronger than was expected in the April Monetary Policy Report.

Beginning on March 19, 2025, the Bank of Canada will publish the weighted average mean and mode of the daily Canadian Overnight Repo Rate Average (CORRA) distribution alongside the existing CORRA benchmark rate, which is based on the median.

This article examines the incentives for banks to hold various assets on their balance sheets for use as collateral when the opportunity cost of doing so can be high. Focusing on the five-year period (2002-07) that preceded the financial crisis, it examines the choices made by financial institutions among the assets that are pledged as collateral in Canada's Large Value Transfer System. This serves as a baseline for collateral-management practices during relatively normal times. The results of this study are important for policy-makers, especially the Bank of Canada, which is concerned both about the efficient functioning of fixed-income markets and about the credit risk it ultimately bears in insuring LVTS settlement. The results suggest that relative market liquidity and market-making capacity are important factors in the choice of securities pledged as collateral in the LVTS.

Since our October 2002 Monetary Policy Report, both core and total CPI inflation have been well above the 2 per cent inflation target. In this environment, inflation expectations have edged up.

The Canadian economy continues to operate above its production capacity, despite some slowing in growth and inflation in the fourth quarter of 2007. Financial conditions have deteriorated since October, leading to tighter credit conditions in industrialized countries.

Bank of Canada Governor David Dodge said today that substantial progress has been made in building investor and consumer confidence in the face of recent economic shocks and corporate finance and accounting scandals.

The Risk Amplification Macro Model (RAMM) is a new nonlinear two-country dynamic model that captures rare but severe adverse shocks. The RAMM can be used to assess the financial stability implications of both domestic and foreign-originated risk scenarios.