This makes judging the balance between aggregate demand and supply in the economy an even greater challenge than usual for monetary policy. The other main risks to Canada's economic outlook include the possibility that the momentum of aggregate demand from the U.S. economy will continue to be stronger than expected and the likelihood of a buildup of inflationary pressures in the United States spilling over into Canada. The U.S. economy has continued to steam ahead. There is a clear need for the pace of expansion in the United States to slow as we progress through this year and into 2001. Because of a lag of some 18 to 24 months in the effect of monetary policy on prices, the Bank is always trying to anticipate inflationary pressures one to two years ahead.
Productivity growth is the only way to achieve long-term gains in incomes and living standards.
The technological revolution that is currently sweeping the world provides Canada with a golden opportunity to improve its productivity. The best contribution monetary policy can make to enhancing productivity is to provide a low-inflation environment. All of this encourages investment in the equipment and software needed to take advantage of the new technology. Canada's inflation-control target and the Bank's commitment to maintaining that target, should ensure that monetary policy fosters a climate conducive to continued improvement in the performance of our economy.