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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.0 R% r8 I# q5 Q4 L
" d6 V" ~6 [5 R% w0 O* H( MThe global economic recovery is proceeding broadly in line with the Bank's projection in its) j4 f: k0 k5 G5 P6 G7 u
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is7 f! y% A( ~9 s; E7 x' u
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing+ J, P( Q3 c- L3 x. B/ z5 N( _
challenges associated with sovereign and bank balance sheets will limit the pace of the European |( j$ i( y; C7 X! _& E
recovery and are a significant source of uncertainty to the global outlook. Robust demand from
" W- ]4 H4 Z! M; k9 r- s! `emerging-market economies is driving the underlying strength in commodity prices, which could8 v0 X$ L# a* [( A* q8 Y8 g E
be further reinforced temporarily by supply shocks arising from recent geopolitical events.( O5 s$ D+ c, j5 S
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The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of& E2 K: w' t1 e. b, G: k+ w
the anticipated rebalancing of demand. While consumption growth remains strong, there are; o8 B2 s8 H# f
signs that household spending is moving more in line with the growth in household incomes.# W5 w. G! s9 r% |9 b
Business investment continues to expand rapidly as companies take advantage of stimulative1 H. N1 q' D) L* j% J0 Q
financial conditions and respond to competitive imperatives. There is early evidence of a
7 |9 C5 R% E8 B+ r( K# }recovery in net exports, supported by stronger U.S. activity and global demand for commodities.8 ^2 [; Y# [( W+ K$ e& R% G$ ^
However, the export sector continues to face considerable challenges from the cumulative effects
" s7 U2 }7 O& Y) oof the persistent strength in the Canadian dollar and Canada's poor relative productivity
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# o- X3 [2 ~7 ~, iWhile global inflationary pressures are rising, inflation in Canada has been consistent with the2 ~9 m; H7 m; ?' Z6 u
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
: d) Q+ U6 a5 S$ c' o1 r6 Aconsiderable slack in the economy.. B; J$ O: W- W" A5 X
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Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
- Q; O$ x: }* o6 D. O( Gat 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the+ r# z. E% n; I% O6 e9 F q
2 per cent inflation target in an environment of significant excess supply in Canada. Any further
8 i" M+ z8 N" M# z" |5 X1 r* C" ~reduction in monetary policy stimulus would need to be carefully considered.
+ `" Z" M9 F9 {* JInformation note:
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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