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OTTAWA - The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.
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The global economic recovery is proceeding broadly in line with the Bank's projection in its1 w6 A+ L& y( _* }+ e
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is. u+ T) r0 Q0 O# t& T& N0 `% W
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
6 z4 b; N9 U/ A& n; c+ b: Xchallenges associated with sovereign and bank balance sheets will limit the pace of the European
7 j" I5 A4 J' f5 }- W- r! Frecovery and are a significant source of uncertainty to the global outlook. Robust demand from0 ^- z7 }$ f4 u+ p; F
emerging-market economies is driving the underlying strength in commodity prices, which could& v4 C! L, L8 \5 r/ U. }+ m4 L
be further reinforced temporarily by supply shocks arising from recent geopolitical events.: T, ^$ Y6 [$ H1 C' ~
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The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of, z* [ g* C+ \; e
the anticipated rebalancing of demand. While consumption growth remains strong, there are
. C9 \% {' w5 C) c0 a* W' usigns that household spending is moving more in line with the growth in household incomes.
( A- j+ z& J1 h4 NBusiness investment continues to expand rapidly as companies take advantage of stimulative
' K( M' |7 \% K$ i& L3 C- Lfinancial conditions and respond to competitive imperatives. There is early evidence of a" V# e3 T+ E0 K4 D/ z/ B( k
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.
# a" b/ {* {; Z5 v' e4 tHowever, the export sector continues to face considerable challenges from the cumulative effects- _! ]8 u5 ^* I
of the persistent strength in the Canadian dollar and Canada's poor relative productivity- v, I2 P. {/ _8 g! x( ?# C4 B& F: t
performance.# T. |: X5 A8 b, v; `% h' C
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While global inflationary pressures are rising, inflation in Canada has been consistent with the
4 F+ Z4 c1 Q+ F h2 [6 zBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the' v! ^/ O6 c/ ?$ c4 }' G+ u, n
considerable slack in the economy.9 {7 z3 ~- ^4 {4 |" P
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Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate, [+ u6 M% g' g! H) ~! |! W4 l: G
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the, B6 n i' J; o5 G Z$ K; K
2 per cent inflation target in an environment of significant excess supply in Canada. Any further
. ^# i% M I7 {% C dreduction in monetary policy stimulus would need to be carefully considered./ M. {5 A7 Q) m" J
Information note:! a: F8 q! M6 M0 p
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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