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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.0 v) E! i2 [2 q
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The global economic recovery is proceeding broadly in line with the Bank's projection in its
( K; C, Z7 A4 ZJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is1 E, q% @# C7 ?: k
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing0 O6 K; _( L" l& ?$ B
challenges associated with sovereign and bank balance sheets will limit the pace of the European$ x7 D7 ?' U/ Z# m" L9 W: b+ U
recovery and are a significant source of uncertainty to the global outlook. Robust demand from: \5 y( F: d; ]0 a3 f+ _: x" Z
emerging-market economies is driving the underlying strength in commodity prices, which could
& ^1 K5 r5 {' f) i7 w) Lbe further reinforced temporarily by supply shocks arising from recent geopolitical events.# q- u) P+ o+ H3 C! ^' ?2 U
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The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of4 E0 W* x4 Y+ G2 j0 g ^
the anticipated rebalancing of demand. While consumption growth remains strong, there are
# Z5 V9 `. f1 |signs that household spending is moving more in line with the growth in household incomes.
# m4 N5 j/ i: KBusiness investment continues to expand rapidly as companies take advantage of stimulative
# C1 v0 y& I/ Yfinancial conditions and respond to competitive imperatives. There is early evidence of a7 ]# M9 [5 r% s! M# l. f" O
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.
7 q9 ?: m% t. P: s2 E1 t |However, the export sector continues to face considerable challenges from the cumulative effects7 X4 [- J7 S a3 m5 ]) m
of the persistent strength in the Canadian dollar and Canada's poor relative productivity
( i1 i- p/ F# x/ M$ e2 [performance.
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While global inflationary pressures are rising, inflation in Canada has been consistent with the: G, F( T3 W5 t* i
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the: }# s1 _- H" ^- H
considerable 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
: f3 D3 [% S7 |at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
9 _& ]3 G% Q& w, \- l9 M2 per cent inflation target in an environment of significant excess supply in Canada. Any further5 i3 R; E/ L! P7 k* P+ {; r
reduction in monetary policy stimulus would need to be carefully considered.
9 m5 R- y' N: D0 N8 l! UInformation note:% I: k8 w& K9 a5 M
, n2 |/ v, G0 ?% Q. B9 DThe next scheduled date for announcing the overnight rate target is 12 April 2011. |
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