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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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) y% x4 s0 Y& @" R M7 DThe global economic recovery is proceeding broadly in line with the Bank's projection in its: t- `& N! s) h# G& G3 t: @
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is7 ]$ y2 ?$ A3 f- e2 A
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
: b6 Z% K, U& Q0 \: Q2 Rchallenges associated with sovereign and bank balance sheets will limit the pace of the European
$ w, f2 W, Z/ [4 F$ g) Lrecovery and are a significant source of uncertainty to the global outlook. Robust demand from
& z* m% B* E. K' `) l, Pemerging-market economies is driving the underlying strength in commodity prices, which could8 q0 \! U% ?/ ?& u+ B) A" S! q
be further reinforced temporarily by supply shocks arising from recent geopolitical events.0 g9 }1 o5 P6 v G# q
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The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of2 H) e5 x$ {; v: I: u
the anticipated rebalancing of demand. While consumption growth remains strong, there are
8 D* ~9 U; D, i: j( Tsigns that household spending is moving more in line with the growth in household incomes.. \( m0 U2 I M) C1 l0 ~- c
Business investment continues to expand rapidly as companies take advantage of stimulative7 V6 W* t$ W5 y0 ?0 n4 H
financial conditions and respond to competitive imperatives. There is early evidence of a
* f" z' a1 Z l0 p+ T/ }9 w) Jrecovery in net exports, supported by stronger U.S. activity and global demand for commodities.- _6 P5 [7 @1 E* f. Y* L+ Q1 r
However, the export sector continues to face considerable challenges from the cumulative effects
$ w( g, w& D2 v8 Y9 y. ]of the persistent strength in the Canadian dollar and Canada's poor relative productivity p; y3 \+ k5 V
performance.
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While global inflationary pressures are rising, inflation in Canada has been consistent with the6 u' b# }) u/ l* m ?! w
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
* V& ~2 `$ J# v! Cconsiderable slack in the economy.0 }: E3 j. x8 u9 E: [
- p6 Y. E, F& X9 kReflecting all of these factors, the Bank has decided to maintain the target for the overnight rate5 x+ P3 @9 ? h Q8 j. L" N* A
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
3 n0 }" D& l+ d. b+ p2 e2 per cent inflation target in an environment of significant excess supply in Canada. Any further* L. A$ B: ^0 {
reduction in monetary policy stimulus would need to be carefully considered.
& ]% [! w5 k# \6 ~. j2 J% b( zInformation note:* Q" R# {! k7 ?' s2 I
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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