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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
$ x1 }& S/ i# Y8 [7 s& jJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
! j$ g1 ^$ q7 u1 `# r' a6 Jsolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing# n# {) T9 M( X z9 |9 w
challenges associated with sovereign and bank balance sheets will limit the pace of the European
: r3 J8 E) R6 y3 ~recovery and are a significant source of uncertainty to the global outlook. Robust demand from5 c: \& Q. X- ? O! Q( b4 Z
emerging-market economies is driving the underlying strength in commodity prices, which could
1 l0 L2 j* {) u4 C% z b- hbe further reinforced temporarily by supply shocks arising from recent geopolitical events.# X8 f$ Y( w/ ^. ~
2 Q e- p/ p' R8 AThe recovery in Canada is proceeding slightly faster than expected, and there is more evidence of5 y+ x- Q ^* H$ h+ b. i
the anticipated rebalancing of demand. While consumption growth remains strong, there are
1 n. Y1 m, s- Qsigns that household spending is moving more in line with the growth in household incomes.0 r. V6 q; u6 w! m5 h1 k- W0 Y
Business investment continues to expand rapidly as companies take advantage of stimulative
6 o" f9 f5 l: F9 T9 I$ Pfinancial conditions and respond to competitive imperatives. There is early evidence of a
A7 o+ Y& ?+ S1 i8 R1 Lrecovery in net exports, supported by stronger U.S. activity and global demand for commodities.6 O# a" b5 D3 }3 Z8 |
However, the export sector continues to face considerable challenges from the cumulative effects
/ P, G. t3 T0 w- s8 {& q: xof the persistent strength in the Canadian dollar and Canada's poor relative productivity% `) G; d+ _- u" X
performance./ E: p& S. J5 v% a/ h9 j, n" L
( O2 t. q6 B1 O) b& j0 N& j& }While global inflationary pressures are rising, inflation in Canada has been consistent with the7 r8 z, H: \6 k* D; R6 {( t7 L
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the8 d5 N3 X# }; e/ ~; k/ C
considerable slack in the economy.8 B. m5 T! [! {9 i* x1 J% _( p/ ?
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Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate* c" B8 w5 N7 i. i! g [
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the& h6 c0 A% x' ^# W0 x
2 per cent inflation target in an environment of significant excess supply in Canada. Any further h3 m* f1 _7 o' ?+ H( m
reduction in monetary policy stimulus would need to be carefully considered./ e, p, p g* w& v: V; }: V
Information note:
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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