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2004 OECD Economic Outlook, Volume 2004 Issue 2

image of OECD Economic Outlook, Volume 2004 Issue 2

OECD's December 2004 assessment of economic developments and prospects.  In addition to the regular economic assessments and statistical information, this issue includes articles examining oil price developments and savings behaviour and the effectiveness of fiscal policy.

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Canada

Growth has been higher than expected so far this year, and the economy is now estimated to be operating close to full capacity. The pace of activity should remain buoyant up to the beginning of 2005, before cooling down to near potential rates of around 3 per cent. With soaring oil prices and easing capacity constraints, inflation is expected to hover above the mid-point of the target range until next year. The Bank of Canada needs to continue raising interest rates toward their neutral level to ensure adherence to the inflation target. The government should avoid any easing of the fiscal stance at this juncture, despite the unexpectedly large surplus recorded for the last fiscal year. Great vigilance should be exercised over spending, in particular with regard to additional transfers from federal to lower levels of government. ...

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