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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.

There have been a number of significant economic and financial developments since the time of the July Monetary Policy Report Update.

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

This Report outlines recent developments in the Canadian economy that affect the rate of inflation and provides an account of the measures taken by the Bank of Canada to control inflation.

The Bank of Canada has played an integral role in Canadian society for 70 years. When the Bank opened its doors in the spring of 1935, this country was struggling to define itself and to survive the economic and social turmoil of the Great Depression. Like Canada’s economy, its central bank has evolved and grown over the years. It has faced critical challenges and embraced change. But the Bank’s mandate has not changed. It is now, as it was then, to provide an effective, national monetary authority for Canada.

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.

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

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

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

Carbon dioxide emissions have been commonly modelled as rising and falling with total output. Yet many factors, such as energy-efficiency improvements and shifts to cleaner energy, can break this relationship. We evaluate these factors using US data and find that changes in energy efficiency of consumption goods explain a significant proportion of emissions fluctuations. This finding also implies that models that omit energy efficiency likely overestimate the trade-off between environmental protection and economic performance.