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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
, p$ ]8 e- z3 z$ I( |# L. CJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is) ]0 ^7 T I5 \7 ]+ c$ D
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing' x' [& m6 ^) A3 @6 n3 t. D0 L
challenges associated with sovereign and bank balance sheets will limit the pace of the European
# I, A$ d! c$ ]* k i% X: |0 {8 N$ x: Drecovery and are a significant source of uncertainty to the global outlook. Robust demand from u. w9 U$ E! w+ b
emerging-market economies is driving the underlying strength in commodity prices, which could
; X& ] F, k8 k( j3 @be 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 of5 |% E4 o; b8 m6 K. @+ W- f e
the anticipated rebalancing of demand. While consumption growth remains strong, there are
5 l: ~- O& C* ssigns that household spending is moving more in line with the growth in household incomes.3 K1 E4 \, J% _. K, E( v/ ~. _$ H
Business investment continues to expand rapidly as companies take advantage of stimulative
% C* G& v/ J( G7 N) h' x% _financial conditions and respond to competitive imperatives. There is early evidence of a
2 O) Q* K6 d2 U( \recovery in net exports, supported by stronger U.S. activity and global demand for commodities.
/ R# P/ i2 M: S! M3 F+ q0 |+ LHowever, the export sector continues to face considerable challenges from the cumulative effects
" e) ]8 @" a @! {0 E+ vof the persistent strength in the Canadian dollar and Canada's poor relative productivity
& w" U( H$ G3 d G+ lperformance.
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3 Z) E9 I9 b2 mWhile global inflationary pressures are rising, inflation in Canada has been consistent with the
* h8 e( i5 D: XBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
) ?( ]' d: o" A( a" L# p# A& uconsiderable 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
* t* U# b, T7 Tat 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
% e: `$ {$ n" k7 H) E2 per cent inflation target in an environment of significant excess supply in Canada. Any further
4 i1 p! V; g7 A6 Y$ o Ireduction in monetary policy stimulus would need to be carefully considered.
) O! s X- v+ v7 r/ s' }$ A4 XInformation note:3 j% v) L* `! V. L& v/ i
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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