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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.- v2 \ @& O# }/ C) _3 p: D, a1 d
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The global economic recovery is proceeding broadly in line with the Bank's projection in its$ D3 I0 |, p# }) Y0 {
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is$ O; M* D3 h' U8 w, i
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing' H5 f3 j" |# J s% t S* c
challenges associated with sovereign and bank balance sheets will limit the pace of the European
% c/ i% `. R8 a2 _) N" Srecovery and are a significant source of uncertainty to the global outlook. Robust demand from& N& y* b; M& T8 m
emerging-market economies is driving the underlying strength in commodity prices, which could
: ~- J. O: a9 |2 l/ h: a0 A5 Mbe 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 of2 N* t: {5 r& k( m- K- g: H6 ]& ^1 x
the anticipated rebalancing of demand. While consumption growth remains strong, there are, t) g0 r3 r/ ?! A. |' ^& t, X
signs that household spending is moving more in line with the growth in household incomes.) v5 `! b; W1 c/ G- j
Business investment continues to expand rapidly as companies take advantage of stimulative
- e& R N6 B! h; T8 Bfinancial conditions and respond to competitive imperatives. There is early evidence of a* J1 N/ B6 N- \
recovery in net exports, supported by stronger U.S. activity and global demand for commodities., m* x O& G; W; @7 L
However, the export sector continues to face considerable challenges from the cumulative effects
) |! z g+ P' x* E' {1 i; Lof the persistent strength in the Canadian dollar and Canada's poor relative productivity; t3 {: K( V" C7 o
performance.. K* ~6 Y* _5 |, E- h" d h
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While global inflationary pressures are rising, inflation in Canada has been consistent with the/ _0 ]( t9 N7 ~4 q& ]
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
0 Q% Y) v) Q, @considerable slack in the economy.
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$ w7 ]5 t. R! W2 q9 ~' v; O5 |Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
! ^1 Q( B& K& u% Qat 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the3 v3 l6 y1 ], j; f. M0 d! o! M3 i$ V' @
2 per cent inflation target in an environment of significant excess supply in Canada. Any further1 e% Z4 C u& T& x3 |9 `7 V9 x
reduction in monetary policy stimulus would need to be carefully considered.( g* o# I$ g1 n$ {
Information note:6 c4 M+ s& K, }6 O) B0 \6 C
- k7 M' o: x9 M4 K! W J mThe next scheduled date for announcing the overnight rate target is 12 April 2011. |
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