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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.# C8 B' g& O& B" V$ R
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The global economic recovery is proceeding broadly in line with the Bank's projection in its5 ~& ?: `- M) v9 \4 Y7 J
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is' ?- z' X7 B7 z9 ~% f4 x
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
/ `4 f8 Z* A0 m' G- o! G" C& Ychallenges associated with sovereign and bank balance sheets will limit the pace of the European
: C' Y: ]& J# _& \. `0 ?recovery and are a significant source of uncertainty to the global outlook. Robust demand from: P5 S" c" Y) K; M9 |% L
emerging-market economies is driving the underlying strength in commodity prices, which could
3 E( `5 @! |7 @7 `: Gbe further reinforced temporarily by supply shocks arising from recent geopolitical events.& ]+ n3 O/ |! H* t. d$ Q/ |
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The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of/ d/ d# H4 W+ P# T
the anticipated rebalancing of demand. While consumption growth remains strong, there are
' ^: q9 A' B3 lsigns that household spending is moving more in line with the growth in household incomes.
4 H2 t" T o* m0 X+ q; HBusiness investment continues to expand rapidly as companies take advantage of stimulative
* M( I- R* Z! b/ r! _financial conditions and respond to competitive imperatives. There is early evidence of a
T* r8 E! E# Z' D9 nrecovery in net exports, supported by stronger U.S. activity and global demand for commodities.8 s7 I+ @: P( \
However, the export sector continues to face considerable challenges from the cumulative effects1 b! i$ M% F# j- \1 x; o
of the persistent strength in the Canadian dollar and Canada's poor relative productivity
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While global inflationary pressures are rising, inflation in Canada has been consistent with the3 u( V) t# S* S9 J* m. O4 ^6 Y
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
5 ~5 ^6 T* j) K3 B) S8 Y1 \& j. cconsiderable slack in the economy.
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4 c8 C6 j6 t v6 ?+ CReflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
& f1 V/ O1 }/ |; @at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
. g+ I0 c5 q* Z: o$ C. I6 h2 per cent inflation target in an environment of significant excess supply in Canada. Any further
2 f! s$ B0 \# x. Y; h8 c* u7 Rreduction in monetary policy stimulus would need to be carefully considered.% i0 n) n6 h* {4 q$ ~
Information note:7 S) O9 d9 E1 n/ ]
% O- K( V$ h$ t7 o) h3 gThe next scheduled date for announcing the overnight rate target is 12 April 2011. |
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