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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
: u4 M: J5 g+ i; S- Y( j/ QJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
9 \* i% W, j5 U4 ~1 b; h2 hsolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing5 A/ h' k3 F# o* \! v2 Y
challenges associated with sovereign and bank balance sheets will limit the pace of the European! C/ S$ g4 @3 L8 ]) `; T( Q
recovery and are a significant source of uncertainty to the global outlook. Robust demand from6 w. B& [0 \2 o5 Q9 _6 `' D
emerging-market economies is driving the underlying strength in commodity prices, which could$ F- N5 ^ k( I" j! z) ^$ z
be further reinforced temporarily by supply shocks arising from recent geopolitical events.
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; C" c8 n, c4 G. V/ e9 c% w; AThe recovery in Canada is proceeding slightly faster than expected, and there is more evidence of
1 Q5 L$ r- a0 C+ [0 Jthe anticipated rebalancing of demand. While consumption growth remains strong, there are( l% u' r0 ? B* ?
signs that household spending is moving more in line with the growth in household incomes.
( N/ u( k% h# UBusiness investment continues to expand rapidly as companies take advantage of stimulative- A' M4 Z) b- m" M
financial conditions and respond to competitive imperatives. There is early evidence of a" s% o3 Q" W3 t1 u# b0 o
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.7 `" I {& V8 v1 A. J, u
However, the export sector continues to face considerable challenges from the cumulative effects5 F2 B2 p) o- S
of the persistent strength in the Canadian dollar and Canada's poor relative productivity: T. J5 i& |4 a; c1 H5 t& O3 a
performance.
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While global inflationary pressures are rising, inflation in Canada has been consistent with the. J9 e0 G+ i( E$ e' j: w. K
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
7 W/ W& q) U R1 Qconsiderable slack in the economy.9 E+ b8 i* f5 k! J, y/ B$ \
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Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
2 P4 x8 R* F2 K+ A& qat 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
4 Y. p) l3 A& Z$ x B0 [2 per cent inflation target in an environment of significant excess supply in Canada. Any further
5 M j$ [3 i( @) G# Freduction in monetary policy stimulus would need to be carefully considered.
& V k1 ~; h3 m- @( j4 b5 K3 VInformation note:* r( F& \8 E" C) ~2 N
+ _: U, d+ E/ m1 L# {( eThe next scheduled date for announcing the overnight rate target is 12 April 2011. |
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