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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* M2 e2 u, M3 @+ u1 Y" x
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
' @$ @/ o& X( M! ]8 E: zsolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
1 @5 h# H: l' c3 h* J2 pchallenges associated with sovereign and bank balance sheets will limit the pace of the European
1 I' S& L3 N$ ]5 h$ Trecovery and are a significant source of uncertainty to the global outlook. Robust demand from* S3 s+ y9 r1 |$ r h h8 h
emerging-market economies is driving the underlying strength in commodity prices, which could
! j8 R/ Z. Q6 x) M! | w% Rbe 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
* V+ f0 H3 Q3 c( ?the anticipated rebalancing of demand. While consumption growth remains strong, there are' s5 W2 _2 X7 ?+ _8 ?
signs that household spending is moving more in line with the growth in household incomes.
4 \/ H9 s+ C! e, ^: e" i# _2 wBusiness investment continues to expand rapidly as companies take advantage of stimulative1 G: L1 H8 B+ Q' J
financial conditions and respond to competitive imperatives. There is early evidence of a8 @( x* G; a+ a6 P: r! M
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.9 T( {6 C7 X. l2 f+ T
However, the export sector continues to face considerable challenges from the cumulative effects6 j* v; O* S2 m. G
of the persistent strength in the Canadian dollar and Canada's poor relative productivity: j V( E% b/ L5 B% V! ~
performance.8 e- x! ^" n$ D3 m
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While global inflationary pressures are rising, inflation in Canada has been consistent with the4 e- r+ Q& S6 P9 {3 e* g; o
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
5 C1 F$ G; E" [ Nconsiderable 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% I+ x4 T; [* o+ Y4 V
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the9 q8 q2 e' D% R. |( r6 p+ ^6 @9 K4 I& x }
2 per cent inflation target in an environment of significant excess supply in Canada. Any further1 T$ o8 v% g' n
reduction in monetary policy stimulus would need to be carefully considered.$ i8 _0 X3 _7 s4 H8 o! m, N2 k
Information note:
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; w8 F5 s9 p+ s+ a1 ^9 Y; X% iThe next scheduled date for announcing the overnight rate target is 12 April 2011. |
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