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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
1 x% f/ H5 m& PJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
2 D* F5 a9 S& e2 K+ u; I$ Y' M1 s5 F! ?solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
9 p+ @4 I3 J4 A! g9 z- kchallenges associated with sovereign and bank balance sheets will limit the pace of the European. `4 `( D; u2 W+ R, V
recovery and are a significant source of uncertainty to the global outlook. Robust demand from
; I- C% N9 Y0 y' C/ B: remerging-market economies is driving the underlying strength in commodity prices, which could4 B. |1 d, W1 Q8 g4 d# `$ i# L# ~
be further reinforced temporarily by supply shocks arising from recent geopolitical events.; N R. ]" i. z& c7 z$ w `& [
* o* n. Z2 k8 Z. A! a% ?The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of
. _$ {$ s7 s1 M) M' P/ C, i- i' E# ethe anticipated rebalancing of demand. While consumption growth remains strong, there are
8 I2 ^" K; i* z a: ^; t2 w4 e, lsigns that household spending is moving more in line with the growth in household incomes.
E) s, Z& X! \: V0 [Business investment continues to expand rapidly as companies take advantage of stimulative! q# X5 N) v; @
financial conditions and respond to competitive imperatives. There is early evidence of a5 X2 X# F5 |- x! L$ F) O
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.& M. Q& C2 ]! o& G. k
However, the export sector continues to face considerable challenges from the cumulative effects
7 Q1 A* L5 K; Wof the persistent strength in the Canadian dollar and Canada's poor relative productivity( m4 T" q& j* n2 F1 j
performance.8 U* W, M' i: a- X3 B
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While global inflationary pressures are rising, inflation in Canada has been consistent with the
: |9 t9 R Z& u- h; [- ]( z* {Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
. q u9 w0 w2 }! J- u- s. G$ Y$ ^6 pconsiderable slack in the economy.
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% W( h ?0 J( n+ B! o5 N) XReflecting all of these factors, the Bank has decided to maintain the target for the overnight rate' C, }0 P$ V- F% t. o' V; ~ m
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
( f9 k0 d4 |( h0 \: t; F( Y2 per cent inflation target in an environment of significant excess supply in Canada. Any further" M4 r, g6 U0 V: R' n
reduction in monetary policy stimulus would need to be carefully considered.8 E5 c5 B2 y; U
Information note:
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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