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2005 OECD Economic Outlook, Volume 2005 Issue 2

image of OECD Economic Outlook, Volume 2005 Issue 2
Twice a year, the OECD Economic Outlook analyses the major trends and examines the economic policies required to foster high and sustainable growth in member countries. Developments in major non-OECD economies are also evaluated. The present issue covers the outlook to end-2007. Together with a wide range of cross-country statistics, the Outlook provides a unique tool to keep abreast of world economic developments.  In addition to the themes featured regularly, this issue contains an analytical chapter addressing the recent run-up in house prices.

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Canada

Despite the marked appreciation of the Canadian dollar, the economy has been extremely resilient and is operating near full capacity. Economic activity is expected to grow at rates close to potential in the next two years, with the foreseen slowdown in domestic demand being offset by improving global market prospects. The surge in energy prices is boosting headline inflation temporarily this year above the upper end of the monetary policy target range.

With inflationary pressures emerging, the Bank of Canada started increasing its policy rate in September and will need to continue to bring interest rates to around their neutral level. Given the buoyant macroeconomic outlook, any additional fiscal stimulus should be avoided. By contrast, more attention should be given to preparing the economy to cope with the rising long-term spending pressures coming from the ageing population.

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