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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.# q, J i: x( [0 y# f l
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The global economic recovery is proceeding broadly in line with the Bank's projection in its4 L* A6 |0 H! p6 }/ M
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is, W; Z! G5 C, Z; t
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
2 B1 O8 }8 W6 Y+ \4 xchallenges associated with sovereign and bank balance sheets will limit the pace of the European
2 q+ W! y1 {- N9 J7 ~recovery and are a significant source of uncertainty to the global outlook. Robust demand from j$ ^% o) A. z! P- c
emerging-market economies is driving the underlying strength in commodity prices, which could
$ L/ Y# v0 R9 `- vbe further reinforced temporarily by supply shocks arising from recent geopolitical events.% |; H$ V. \6 v. A6 x& P0 O% H+ D
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The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of
0 b$ }/ V' n( lthe anticipated rebalancing of demand. While consumption growth remains strong, there are _0 M) s/ p6 o0 N1 V7 E* Z
signs that household spending is moving more in line with the growth in household incomes.2 n0 D4 W3 A0 ]4 W+ e
Business investment continues to expand rapidly as companies take advantage of stimulative3 O `) Q% b% C3 p' b) ^9 `9 K. H
financial conditions and respond to competitive imperatives. There is early evidence of a, _( `: A* d- _( u
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.
, h2 D7 E4 {: \: K9 _* p3 z- AHowever, the export sector continues to face considerable challenges from the cumulative effects
9 x' R; K0 F! I4 N, cof the persistent strength in the Canadian dollar and Canada's poor relative productivity, `9 L& T& d1 W- j8 l" z7 L
performance.
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While global inflationary pressures are rising, inflation in Canada has been consistent with the0 J" b$ u- z% D- p3 `9 ^/ [
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
. O5 ]+ o. {/ j+ xconsiderable 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
/ J' M, Y! {8 l6 b9 s5 F- bat 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the! a6 l9 }! v$ C3 }6 @
2 per cent inflation target in an environment of significant excess supply in Canada. Any further$ P: b/ e6 n0 d
reduction in monetary policy stimulus would need to be carefully considered.
) b, Q+ q' o: y" L) GInformation note:
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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