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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./ o7 @" R7 v& e0 h3 N% G
1 r' F# y% V9 b$ i& RThe global economic recovery is proceeding broadly in line with the Bank's projection in its
; w! G6 f/ Q5 o. _7 xJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
& U* x7 k8 t. j1 E$ N; Csolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing, c, o4 E8 Y9 N1 Y
challenges associated with sovereign and bank balance sheets will limit the pace of the European
1 P, D% }4 p9 K* E8 @recovery and are a significant source of uncertainty to the global outlook. Robust demand from7 o' U9 y4 e9 z3 m
emerging-market economies is driving the underlying strength in commodity prices, which could
: ]2 F) M, @$ `- h6 `4 Gbe 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+ D3 Q8 c8 _, Y
the anticipated rebalancing of demand. While consumption growth remains strong, there are
; T; S9 l9 x; u9 c: Y' |& a8 Isigns that household spending is moving more in line with the growth in household incomes.7 I* E$ _) u5 K$ |; _9 V
Business investment continues to expand rapidly as companies take advantage of stimulative/ J" z% p) k! W
financial conditions and respond to competitive imperatives. There is early evidence of a
* c/ w3 t5 K T( w% @6 G! Vrecovery in net exports, supported by stronger U.S. activity and global demand for commodities. d5 R, T5 J! ]) ~4 \& l
However, the export sector continues to face considerable challenges from the cumulative effects
+ V( T" t+ ~. y% _$ E8 `of the persistent strength in the Canadian dollar and Canada's poor relative productivity
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+ M2 v" Y& G" r" BWhile global inflationary pressures are rising, inflation in Canada has been consistent with the5 N4 T9 w1 `; Q2 H/ ?4 I o: ]
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
' r# B( X5 T+ s* d; Iconsiderable slack in the economy.
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Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate, ]. M9 p: E: U3 G' g, Y& Q
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the) [7 R# G. ^; u% ~6 R7 r
2 per cent inflation target in an environment of significant excess supply in Canada. Any further
. U! f6 |/ J1 K2 J# ~. qreduction in monetary policy stimulus would need to be carefully considered.
" j3 G" \; C7 I7 fInformation note:
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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