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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.+ a9 w0 v' b+ @' x8 x9 R$ x
6 L0 V( @2 Q/ q+ p1 Y, Z! ^The global economic recovery is proceeding broadly in line with the Bank's projection in its3 u+ E7 r7 M$ J. ^6 t
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
6 m! D3 s) S! V. Z' {# s+ c: E) Gsolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing$ l" c1 { ?! w5 s
challenges associated with sovereign and bank balance sheets will limit the pace of the European! j! q. k1 r- v1 F
recovery and are a significant source of uncertainty to the global outlook. Robust demand from
) B$ D- c. c& N" y; a% nemerging-market economies is driving the underlying strength in commodity prices, which could; p0 L7 Z3 Z7 i$ ?
be further reinforced temporarily by supply shocks arising from recent geopolitical events.
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% k/ T9 J' z1 p1 zThe recovery in Canada is proceeding slightly faster than expected, and there is more evidence of7 l* i; L" Q3 {" D$ b; b, y5 f' r% E
the anticipated rebalancing of demand. While consumption growth remains strong, there are4 h9 B p$ z( N2 ^$ e
signs that household spending is moving more in line with the growth in household incomes.$ p# Q& `; I6 [; ~
Business investment continues to expand rapidly as companies take advantage of stimulative
3 y; t$ k: r5 b6 Ifinancial conditions and respond to competitive imperatives. There is early evidence of a; t7 K5 i" n7 D# L" m' _7 }
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.
% ?$ }, j: q& L1 h, nHowever, the export sector continues to face considerable challenges from the cumulative effects' G7 q. }6 w/ W' m- ~: |, O/ K
of the persistent strength in the Canadian dollar and Canada's poor relative productivity
& Y. m8 N+ B# ] vperformance.4 V1 d- a6 ~. T, ^
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While global inflationary pressures are rising, inflation in Canada has been consistent with the# U+ ^# |$ M$ j, h. `0 H# {
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the+ b4 L" S6 D# T- w( s3 p! c
considerable slack in the economy.
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/ S! b2 h0 {1 W# }. wReflecting all of these factors, the Bank has decided to maintain the target for the overnight rate4 d, u2 @, h& q- ?
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the6 _2 S5 r: @. Q9 v% B; [
2 per cent inflation target in an environment of significant excess supply in Canada. Any further9 H9 S1 [3 g; z% ], C% T) E
reduction in monetary policy stimulus would need to be carefully considered.0 O6 I( H! D3 E) D) B! J/ u
Information note:
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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