David Dodge: Summary of the latest Monetary Policy Report
Opening statement by Mr David Dodge, Governor of the Bank of Canada, at a press conference
following the release of the Monetary Policy Report Update, Ottawa, 27 January 2005.
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Today, we released the Update to our October Monetary Policy Report. The Update reviews economic
and financial trends in the context of Canada's inflation-control strategy.
The outlook for the Canadian economy continues to be shaped by global developments, including the
realignment of world currencies. The near-term outlook for the global economy is a touch weaker than
projected in the October Report, but more solidly based because of somewhat lower oil prices and
greater confidence in the momentum of the U.S. economy.
We expect the Canadian economy to operate a little further below its full production capacity in 2005
than was anticipated at the time of the last Report, largely reflecting the dampening effects on
aggregate demand of the recent appreciation of the Canadian dollar.
For 2006, we project growth to pick up to slightly more than 3 per cent, consistent with returning the
economy to its production capacity in the second half of the year, and returning core inflation to
2 per cent around the end of 2006.
In line with this revised outlook, the pace of reduction in monetary stimulus is likely to be slower than
that envisioned in the October Report.
There are both upside and downside risks around the outlook, which continue to relate to the
adjustment to global developments. As circumstances change, we always need to be ready to
re-assess the policy implications.