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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.3 C: o0 T- T: o" ]' b% s
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The global economic recovery is proceeding broadly in line with the Bank's projection in its' P, B; a+ [$ Z, u' |. C
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
; o6 I, D5 K2 ]solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing; g l8 b* B% |5 u
challenges associated with sovereign and bank balance sheets will limit the pace of the European
! }3 d8 D) ~/ E! arecovery and are a significant source of uncertainty to the global outlook. Robust demand from
1 F; p6 c$ p8 s7 vemerging-market economies is driving the underlying strength in commodity prices, which could G6 l1 h) \7 v" k! B8 g
be further reinforced temporarily by supply shocks arising from recent geopolitical events., R6 k% N% ?# |* x/ c. K
- A, J2 a0 m7 ~) h/ i* ~The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of
, ?- S$ j+ y. o. qthe anticipated rebalancing of demand. While consumption growth remains strong, there are
9 S7 b$ f0 f6 Y. B1 O; Vsigns that household spending is moving more in line with the growth in household incomes.
A. p2 i5 Y" N" L( J5 A1 ~; TBusiness investment continues to expand rapidly as companies take advantage of stimulative6 G; T9 A q( O5 X6 T# t
financial conditions and respond to competitive imperatives. There is early evidence of a6 F$ V0 O+ k! D
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.6 ~0 t0 T2 b' |- R4 z; D) j
However, the export sector continues to face considerable challenges from the cumulative effects
2 ]3 | ~+ S4 P3 O; h) l8 ^' Lof the persistent strength in the Canadian dollar and Canada's poor relative productivity }4 e3 ?. |/ z6 U. g% f
performance.
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% E, ~; M) j$ d% i l- z# lWhile global inflationary pressures are rising, inflation in Canada has been consistent with the
' z8 q* u2 q7 a( u" qBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the. ]4 j$ Z. ~ X% q& V0 }, ?
considerable slack in the economy.
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" ~4 k3 w) i. d1 B3 [Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
, x+ v! N/ V3 e6 q1 Z. Tat 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the) c, F' B; h$ t& @9 W2 f/ t- s
2 per cent inflation target in an environment of significant excess supply in Canada. Any further
x: a3 N3 Y+ U; [reduction in monetary policy stimulus would need to be carefully considered.6 B; Z" R4 {( l' h. y3 F
Information note:
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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