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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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The global economic recovery is proceeding broadly in line with the Bank's projection in its
5 Y4 p* [8 ^+ m, ~January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
5 g9 x% D, @5 C8 q: Ssolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing' f5 Y: t4 E0 l9 i# V7 V
challenges associated with sovereign and bank balance sheets will limit the pace of the European
6 C9 j6 R( q. lrecovery and are a significant source of uncertainty to the global outlook. Robust demand from) A; v- l2 l; _: [4 K
emerging-market economies is driving the underlying strength in commodity prices, which could7 M, e R) P! c, e
be 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' W3 _: o8 @$ z9 d) y0 }6 C
the anticipated rebalancing of demand. While consumption growth remains strong, there are" F/ ^9 m9 e- U$ A+ K7 C& v
signs that household spending is moving more in line with the growth in household incomes.
" j4 U& Q' W* l% N" s8 rBusiness investment continues to expand rapidly as companies take advantage of stimulative& t! T2 a2 T% }
financial conditions and respond to competitive imperatives. There is early evidence of a
/ W; y- N" }$ I M! b5 ] Qrecovery in net exports, supported by stronger U.S. activity and global demand for commodities.
! h; P8 r! t: D6 }3 ^However, the export sector continues to face considerable challenges from the cumulative effects
2 L' ~4 M+ J1 P$ P, R3 Uof the persistent strength in the Canadian dollar and Canada's poor relative productivity+ i1 p& V: J% O7 R3 T, S
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: V$ D1 ], N/ e4 sWhile global inflationary pressures are rising, inflation in Canada has been consistent with the; O h5 o' }" b% c
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
% O! U# {5 J- t1 {, C6 c+ kconsiderable slack in the economy. r/ q$ b+ \1 `% ]
+ x+ T9 `9 X) SReflecting all of these factors, the Bank has decided to maintain the target for the overnight rate* N$ |: p/ e9 e9 }7 Y0 s
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
" k4 c9 }- K3 J6 t2 per cent inflation target in an environment of significant excess supply in Canada. Any further* i( G! v- o" y4 u% v5 z4 W& U! A( b
reduction in monetary policy stimulus would need to be carefully considered.* I2 q L' y6 ]( K2 |( ]$ W- E" q
Information note:
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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