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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 global economy has shown greater strength than was anticipated at the time of the November Report.

Positive commodity price shocks reduce labor income inequality in commodity-exporting economies by compressing the skill premium, as unskilled-labor-intensive sectors such as construction expand faster than skill-intensive services. A multisector small-open-economy model shows how saving or spending commodity windfalls can reinforce or moderate this decline in inequality.

There have been a number of significant economic and financial developments since the time of 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.

The global economy has been unfolding largely as expected, and prospects for continued robust growth are quite favourable, especially over the near term.

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

This is the first in a series of semi-annual reports by the Bank of Canada on Canadian monetary policy.

The Canadian economy continues to adjust to major global developments.

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.