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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 its% M1 p2 m9 ]& h* w5 L
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is: ?2 B& Q4 S( `0 B& e
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
' t; B6 j {' Y1 x- A8 W3 C" f& J" l( Fchallenges associated with sovereign and bank balance sheets will limit the pace of the European. G6 ~/ l& u# [7 s- s) y
recovery and are a significant source of uncertainty to the global outlook. Robust demand from
6 T' [" l- k/ b! ~emerging-market economies is driving the underlying strength in commodity prices, which could
, c% l# H8 P7 ]- G5 Y/ D+ g, qbe further reinforced temporarily by supply shocks arising from recent geopolitical events.8 Q: l( i6 N0 [4 A0 R( K8 D0 ~
& \( w8 }4 a- }) A5 S. }3 wThe recovery in Canada is proceeding slightly faster than expected, and there is more evidence of5 o, [6 R O8 F* K8 W6 u$ e2 m
the anticipated rebalancing of demand. While consumption growth remains strong, there are0 v1 q6 V5 V0 Z0 D! e5 o6 F! _/ s
signs that household spending is moving more in line with the growth in household incomes.
; O7 H. h3 d- {& J) L4 {: DBusiness investment continues to expand rapidly as companies take advantage of stimulative: G8 Z# C6 b; c, r
financial conditions and respond to competitive imperatives. There is early evidence of a* Y# Z8 @$ W7 l9 x( ^" W0 _4 W. J
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.
8 Q. M% m% S, S) c' z) SHowever, the export sector continues to face considerable challenges from the cumulative effects T& v, ?7 ~8 t8 p, p9 _
of the persistent strength in the Canadian dollar and Canada's poor relative productivity# [4 U& B# A: W
performance.1 W$ g, C c# V9 K+ J ]$ |3 [
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While global inflationary pressures are rising, inflation in Canada has been consistent with the
* }4 M7 `. P* r% e. IBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the" W7 _( j0 c8 |' d$ b9 D' `8 W4 P
considerable slack in the economy.
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' x" e6 G1 ~" |" t/ F5 ~Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
) E. H0 R4 C) D% Rat 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
+ @7 U3 `' ?6 M5 V! I7 h, M2 per cent inflation target in an environment of significant excess supply in Canada. Any further& F3 W5 D5 V/ V+ F7 A; l% a' s- k* i" G
reduction in monetary policy stimulus would need to be carefully considered.
# n. |: H. X& t9 Z8 f+ x! q) LInformation note:
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- D# N" Z2 Q2 B+ U; HThe next scheduled date for announcing the overnight rate target is 12 April 2011. |
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