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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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8 Y( O5 K$ B9 w* j; S8 @, RThe global economic recovery is proceeding broadly in line with the Bank's projection in its" n, D# g0 G7 P5 E9 Z/ c0 e
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
: L. r' L9 a0 g5 b5 [+ Z) ]. ysolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
( Q2 K6 j- M4 K7 M$ S% x9 a6 B! Bchallenges associated with sovereign and bank balance sheets will limit the pace of the European
( z. p' t* d8 I W$ rrecovery and are a significant source of uncertainty to the global outlook. Robust demand from
, n; f+ x; a4 R6 k0 c3 I9 I9 J; Iemerging-market economies is driving the underlying strength in commodity prices, which could6 Y- p/ x8 r9 W* \7 T
be further reinforced temporarily by supply shocks arising from recent geopolitical events.
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+ H- F ^( z% V) X5 s- YThe recovery in Canada is proceeding slightly faster than expected, and there is more evidence of+ h# c# T/ \+ J5 e
the anticipated rebalancing of demand. While consumption growth remains strong, there are" M) r1 ]& p4 ~1 T! H
signs that household spending is moving more in line with the growth in household incomes.7 R- J: Z2 |+ B) o5 j! y
Business investment continues to expand rapidly as companies take advantage of stimulative
1 A) D3 j ]* o2 `financial conditions and respond to competitive imperatives. There is early evidence of a
4 q% _) J6 Y. c. C; l! I! R( P. Crecovery in net exports, supported by stronger U.S. activity and global demand for commodities.+ |2 J( ]8 A4 v, Z
However, the export sector continues to face considerable challenges from the cumulative effects7 F7 A* o0 ~) J6 d1 x2 @
of the persistent strength in the Canadian dollar and Canada's poor relative productivity
+ L; G- r2 W' ~! Mperformance.
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1 G7 K7 ^# N, K. YWhile global inflationary pressures are rising, inflation in Canada has been consistent with the
/ }+ o$ J7 z4 u1 Y/ u y0 }( SBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the$ M8 M$ E. ` o r
considerable slack in the economy.; @, I( z% O! E1 l# ~
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Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate; |4 s1 i8 _) H0 K+ f8 n- ?' V
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the; ^! ]& A, G N* ]% b, z; t9 q
2 per cent inflation target in an environment of significant excess supply in Canada. Any further
) n( B! X) l" sreduction in monetary policy stimulus would need to be carefully considered.
1 ], o) `! m1 d% B% n4 AInformation note:
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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