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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. i) O! P }& a5 j( o+ U3 u4 K, W
- v9 R) d$ R- X) w& WThe global economic recovery is proceeding broadly in line with the Bank's projection in its
5 `: y& Y4 L: a; L+ r! ^January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
8 Y0 n" @/ C( N$ R' d3 d) f" Rsolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing c4 ^7 [, E! l9 ?3 Z
challenges associated with sovereign and bank balance sheets will limit the pace of the European/ l8 m% S' X1 S& r$ _, f$ q8 p$ e
recovery and are a significant source of uncertainty to the global outlook. Robust demand from
0 S! V; `+ z( X* M6 Yemerging-market economies is driving the underlying strength in commodity prices, which could
7 y4 ]; [( c i( H6 ebe 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. |# G( v- M6 U3 V4 ?6 _
the anticipated rebalancing of demand. While consumption growth remains strong, there are; v; O; p8 ~4 r. r
signs that household spending is moving more in line with the growth in household incomes.9 I0 ]8 e8 ]+ p8 h
Business investment continues to expand rapidly as companies take advantage of stimulative
" X- Q2 d5 s8 ofinancial conditions and respond to competitive imperatives. There is early evidence of a$ g$ h% P2 [1 g# l- e5 l
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.# Y9 H+ c( i5 q* [/ n5 p; K5 T) G( W
However, the export sector continues to face considerable challenges from the cumulative effects; G1 w, L* p- F2 d* X/ U- d4 I
of the persistent strength in the Canadian dollar and Canada's poor relative productivity
$ M" f) u( p0 T3 Aperformance.) S/ E- s' q3 W! X( f" y8 O
1 |/ a$ k0 T) ^While global inflationary pressures are rising, inflation in Canada has been consistent with the- S. X6 P% ], v$ y- w
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the, g- b: P/ \, R' e
considerable 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$ u+ B) O% e. }) e; |) d
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the" _9 t7 i0 p( O+ k5 I. R/ j
2 per cent inflation target in an environment of significant excess supply in Canada. Any further
& O+ X3 ]# j; Y, kreduction in monetary policy stimulus would need to be carefully considered.+ A$ |4 l) g" p1 ?# d
Information note:0 [1 u1 @0 @" f+ ^" f5 y
+ n+ q, d: \ S* RThe next scheduled date for announcing the overnight rate target is 12 April 2011. |
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