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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
3 D+ s0 U) w! |: ZJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
7 F5 ?1 P0 ?; d& W' }; m% {solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing6 x) }* K$ P: U! W4 n" s
challenges associated with sovereign and bank balance sheets will limit the pace of the European8 \1 m% o6 P; i8 x6 H) U6 R" p5 S/ u
recovery and are a significant source of uncertainty to the global outlook. Robust demand from
" E- H& b) g' G9 ^emerging-market economies is driving the underlying strength in commodity prices, which could
. Y5 ?: b( r0 R$ Cbe further reinforced temporarily by supply shocks arising from recent geopolitical events.
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6 Z5 o* d; {; L% \. R& T* h* m7 E: ]The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of7 B8 Y; H4 K, g% B8 Q: l
the anticipated rebalancing of demand. While consumption growth remains strong, there are
/ h; u! ]) J( ?; e* {signs that household spending is moving more in line with the growth in household incomes.
3 n& l0 g7 T. |/ J: zBusiness investment continues to expand rapidly as companies take advantage of stimulative
. }4 Z6 ^. L- ^( Tfinancial conditions and respond to competitive imperatives. There is early evidence of a$ B6 r5 ~2 W9 ^+ C0 N. O
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.
7 ~0 ] }4 _- F4 |6 A8 T9 XHowever, the export sector continues to face considerable challenges from the cumulative effects/ F' R7 h* g: T u+ S# }- H# d
of the persistent strength in the Canadian dollar and Canada's poor relative productivity$ @' y& S5 x3 G) f) Z, @. j
performance.6 t" @% D: ?) O
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While global inflationary pressures are rising, inflation in Canada has been consistent with the! v% l9 G& v, h# c& g
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the. T. E9 {) l+ s$ E1 i# l
considerable slack in the economy.+ T/ V3 N; o( {7 @% s
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Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
3 X4 T* o! M" H/ q. g+ K! i' oat 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
2 l/ k' k! O# C. W% F2 per cent inflation target in an environment of significant excess supply in Canada. Any further' M& c# Y' B7 d0 u r+ _* m
reduction in monetary policy stimulus would need to be carefully considered.+ B( l" b; a$ o$ I! I: ~: b
Information note:
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% K5 Z( ~3 f7 q% L e' y. CThe next scheduled date for announcing the overnight rate target is 12 April 2011. |
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