In 1937/38, the US economy entered a new recession, which was partly blamed on the monetary tightening brought about by the higher reserve requirements. Fiscal policy was also tightened. With hindsight, one can say that it was a failure to appreciate the fragility of the recovery and a misinterpretation of the inflationary consequences of the monetary developments that led to a too early exit.
Domestic demand may well be stronger; at the same time, the external uncertainties bearing on the outlook appear to be greater than they were in early July. We will provide a detailed view of our outlook for the Canadian economy in our next Monetary Policy Report, on 23 October. ******************** This past year has certainly been full of challenges.