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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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: T: E6 v9 O3 j2 e. uThe global economic recovery is proceeding broadly in line with the Bank's projection in its
6 F4 g/ z7 Q- S: PJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is0 z8 O( f/ N5 e$ E. q5 x
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing+ L- } ~, s! @; d/ c
challenges associated with sovereign and bank balance sheets will limit the pace of the European# c( f, C1 `; R: c6 N4 v! |, U) R
recovery and are a significant source of uncertainty to the global outlook. Robust demand from
5 z9 K C# b. U; j+ C* remerging-market economies is driving the underlying strength in commodity prices, which could" B0 q$ D4 f7 q' ]$ `
be further reinforced temporarily by supply shocks arising from recent geopolitical events.
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The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of
H6 x+ Q* q% L; I; K7 w8 p; Dthe anticipated rebalancing of demand. While consumption growth remains strong, there are
4 [) Y. T: R. N, Q! D* R% i) Jsigns that household spending is moving more in line with the growth in household incomes.2 P; H1 N+ Q" t D( ]
Business investment continues to expand rapidly as companies take advantage of stimulative
$ U! e' N4 u6 i- Bfinancial conditions and respond to competitive imperatives. There is early evidence of a
0 Q$ X9 k& Y. K, h+ B7 z# A0 \recovery in net exports, supported by stronger U.S. activity and global demand for commodities.
4 V% _8 T! {9 y T$ m9 |$ M, THowever, the export sector continues to face considerable challenges from the cumulative effects. ?5 W& ^9 G4 }5 C t) r
of the persistent strength in the Canadian dollar and Canada's poor relative productivity
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While global inflationary pressures are rising, inflation in Canada has been consistent with the
# q; ?, R0 [6 }) FBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the3 D& E8 h1 X" L# Y* a
considerable slack in the economy.' i- F6 W' ~' Z+ T! }: Q" n/ P
3 W3 }. e4 r% h" U- X' uReflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
$ k" E$ E$ `7 M. J! M7 G. ?at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the$ ]4 S" e0 {; i+ Q4 N7 w' `/ G
2 per cent inflation target in an environment of significant excess supply in Canada. Any further
, t& e/ ~0 \- @, q/ M% Xreduction in monetary policy stimulus would need to be carefully considered.+ `; v8 Z) |" E( l
Information note:
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" ^) O* f& q* w* r6 \The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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