The Bank of Canada today released its semi-annual Monetary Policy Report.

The report notes that the economic slowdown in North America is deeper and longer-lasting than anticipated, and that the terrorist attacks in the United States have added a further element of weakness and uncertainty for the global economy and for Canada.

The central bank expects economic growth in Canada to be close to zero or slightly negative in the second half of 2001.

Because of the unusual nature of the uncertainty facing the global economy, the Bank of Canada says it is not presenting a conventional forecast, but rather an economic outlook based on working assumptions.

These assumptions are that there will be no further major escalation of terrorism and that business and consumer confidence will return to normal levels in the second half of 2002.

Based on these assumptions and given the amount of monetary and fiscal stimulus already provided, the bank expects the Canadian economy will gain speed through 2002, with growth averaging about 2% in the first half and 4% in the second half.

According to the bank, core inflation is expected to fall to about 1.5% in the second half of 2002. Total CPI inflation in 2002 is also projected to move below the 2% midpoint of the bank’s inflation-control target range, if energy prices remain at or below their levels of early September.