In a report following annual consultations with Canadian officials, the IMF offered praise for Ottawa's economic management, saying Canada has been able to sustain a moderate pace of growth and keep inflation contained amid a boom in commodity prices.

The IMF is projecting 3.1 percent growth in Canada this year and 3.0 percent expansion in 2007, a moderate pace that sustains expansion without sparking too much inflationary pressure.

IMF directors "agreed that the near-term macroeconomic outlook appears broadly favorable," the IMF said.

"Growth is likely to remain around most estimates of Canada's potential growth rate through 2007, in part reflecting the support that continued high commodity prices are likely to provide to incomes and domestic demand."

The IMF concluded its consultations May 22, just two days before the Bank of Canada lifted its base rate a quarter-point for a seventh time to 4.25 percent.

At the time, the IMF said "some modest further increase in the policy interest rate might be required."

The IMF said it "commended the Bank of Canada for continuing carefully to withdraw monetary stimulus in recent months."

IMF directors also highlighted "Canada's enviable macroeconomic and policy performance since the mid-1990s, reflecting the benefits of firm commitments to debt reduction and to an inflation target," the IMF said in a statement.

"They noted that, while high commodity prices have benefited the resource-rich western provinces in particular, activity has remained strong in much of the rest of the country despite the appreciated exchange rate, which owes much to the economy's flexibility and regional diversity."

Inflation "has remained subdued" despite high energy prices, with "the strong currency and global competition keeping prices of imported goods low and well-anchored inflation expectations helping to contain the spillover of energy price shocks into other prices," the report said.