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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.6 _- {# ^; I, d$ r+ F7 ^0 G
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The global economic recovery is proceeding broadly in line with the Bank's projection in its
, i. I' n! I7 {8 t2 |; Q+ s! lJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
6 f+ E$ M3 w* S: lsolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
: j* Q+ E$ l! H/ s7 `8 Wchallenges associated with sovereign and bank balance sheets will limit the pace of the European
2 G4 V, X: x1 V' Y8 ?; e+ u! irecovery and are a significant source of uncertainty to the global outlook. Robust demand from& w5 J9 v; q3 _+ ]
emerging-market economies is driving the underlying strength in commodity prices, which could
0 J* l( @) a" D, @. G( \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 of
; S5 _& x3 A1 D9 Y# ] y% k& xthe anticipated rebalancing of demand. While consumption growth remains strong, there are
. G' q9 o: L/ ~/ C0 ~5 lsigns that household spending is moving more in line with the growth in household incomes.. y y" u+ {0 ~2 t
Business investment continues to expand rapidly as companies take advantage of stimulative# q- |) d/ U# @' ^$ c
financial conditions and respond to competitive imperatives. There is early evidence of a3 T- o, y% J% i0 Z
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.3 {- R+ ]$ W/ {: O/ j" y- k
However, the export sector continues to face considerable challenges from the cumulative effects7 \- B5 i3 @; p1 E
of the persistent strength in the Canadian dollar and Canada's poor relative productivity# l' d1 g1 ~+ Q# A+ U
performance.
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8 p+ i$ t; W8 u$ l7 t: TWhile global inflationary pressures are rising, inflation in Canada has been consistent with the
/ t7 H- p; K$ z9 j# h+ bBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
6 |* Z% {8 q$ L( s; Uconsiderable slack in the economy.0 s9 |* t4 ? Z
# U0 \# `& T7 A% G% SReflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
9 k) `0 q7 p. a: u& w+ ?+ _at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the- c6 b1 H, K0 {: \& ]: v6 g4 g' y; N
2 per cent inflation target in an environment of significant excess supply in Canada. Any further
# D; o" K. u4 O ireduction in monetary policy stimulus would need to be carefully considered.; D- F, C3 r @8 g; O
Information note:
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# \% K9 p" n% u w2 }! _& zThe next scheduled date for announcing the overnight rate target is 12 April 2011. |
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