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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
- u7 x s7 h# t( c# W7 g% CJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
8 Q* d) @- g- A3 v9 Vsolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing+ U c8 c5 X8 H# l# H1 e4 B
challenges associated with sovereign and bank balance sheets will limit the pace of the European& J7 C. T* B% | R+ c; z0 S
recovery and are a significant source of uncertainty to the global outlook. Robust demand from
! m2 D6 f- {9 a7 S) c. `0 j9 r9 i- yemerging-market economies is driving the underlying strength in commodity prices, which could
& W" a* V. M" ?+ p: t1 z* q4 Jbe further reinforced temporarily by supply shocks arising from recent geopolitical events., ~3 p7 c1 o1 ~5 i; |9 y& C
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The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of5 v- X4 Y4 T& ^$ S% F: G
the anticipated rebalancing of demand. While consumption growth remains strong, there are
1 [! |& Y$ b0 wsigns that household spending is moving more in line with the growth in household incomes.8 C# S% N. y6 D# ^
Business investment continues to expand rapidly as companies take advantage of stimulative
' I3 K' @& |7 s. f2 k5 gfinancial conditions and respond to competitive imperatives. There is early evidence of a
9 m1 M# n7 `% M9 L8 I: q' arecovery in net exports, supported by stronger U.S. activity and global demand for commodities.
0 X0 x+ B* |/ i+ X; e9 _3 }0 d# f# QHowever, the export sector continues to face considerable challenges from the cumulative effects9 k8 a! ]' U- o0 c
of the persistent strength in the Canadian dollar and Canada's poor relative productivity1 Z- h9 s' w8 Q7 L ~7 S1 A
performance.
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5 j0 R* n9 M8 w: S) \6 {1 n( z RWhile global inflationary pressures are rising, inflation in Canada has been consistent with the
" ?9 E! C8 K* @1 d, }' R: OBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
2 L, H. U3 m/ m/ w( j$ j; {considerable slack in the economy.
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5 m f" i1 O5 p- K' K- m- wReflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
3 i# e. b) D; g5 V9 a i: \at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the2 j1 n; m3 Z: ]9 o
2 per cent inflation target in an environment of significant excess supply in Canada. Any further( F1 p+ z1 W# l0 I; \4 O
reduction in monetary policy stimulus would need to be carefully considered.7 F, R! Y ?) M6 I
Information note:
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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