Following tighter monetary conditions, terms-of-trade losses and weaker exports, activity has recently eased and the economy is estimated to be operating close to its potential level. Looking forward, it is expected to benefit from a pick-up in some external markets while domestic demand decelerates modestly following its recent robust expansion. Inflation pressures are likely to remain limited, as energy prices have fallen from recent peaks and wages may rise only moderately.
In the context of on-target inflation and a modest pick up in activity, the Bank of Canada should keep its policy rate constant so long as no nation-wide labour market pressures come into view. At the same time, fiscal settings at all levels of government need to remain prudent and the federal government should focus on reducing the debt burden before ageing pressures accumulate.
|Population (000s), 2005||32 271|
|Area (000 sq km)||9 976|
|GDP (Billion USD), 2005||1 081.8|
|Life expectancy at birth (Women, Men), 2003 ||82.4, 77.4|
|Total labour force (000s), 2005||17 402|
|Indicators||% change unless otherwise indicated|
|Household savings ratio||1.5||1.1||1.3|
|Consumer price index||2.1||1.5||2.0|
|Short-term interest rate (%)||4.2||4.3||4.3|
|Unemployment rate (%)||6.4||6.6||6.5|
|General government financial balance|
|Current account balance (% GDP)||1.1||0.1||0.0|
No. 258/259, December 2006