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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 its3 Q) a; r, Q! ~* A. g" N ?: d
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is0 u- U+ J/ j1 g
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
4 `, Z' V6 d* i9 ]8 K Lchallenges associated with sovereign and bank balance sheets will limit the pace of the European7 N i, u, R8 \' r6 P; B4 E
recovery and are a significant source of uncertainty to the global outlook. Robust demand from6 ~. V7 O1 R( }) c& L! F
emerging-market economies is driving the underlying strength in commodity prices, which could
. B, A; W% k& Mbe further reinforced temporarily by supply shocks arising from recent geopolitical events.7 \+ o8 L1 j& s4 A
8 y) X. S, H% i5 \: x2 ^The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of6 k) ~7 z# T' r U" `
the anticipated rebalancing of demand. While consumption growth remains strong, there are
9 V6 d6 p6 k' R) v) `signs that household spending is moving more in line with the growth in household incomes.
* g7 l6 Z# Y' D& y& G% O CBusiness investment continues to expand rapidly as companies take advantage of stimulative
! P1 k1 ?* ?0 \/ z. D6 E- o4 k3 afinancial conditions and respond to competitive imperatives. There is early evidence of a" ]8 Z) ^& H' t+ g3 G/ i) O- h+ L
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.; h! k3 V0 y' c4 \+ ?) W9 k5 R: j8 K
However, the export sector continues to face considerable challenges from the cumulative effects
* O7 B% a% N5 b9 K+ w; qof the persistent strength in the Canadian dollar and Canada's poor relative productivity
0 \+ s( m8 O1 k: aperformance.
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While global inflationary pressures are rising, inflation in Canada has been consistent with the
6 ?7 S6 u5 O: t" h- wBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the' z+ S+ b% ~% ^" _& A
considerable slack in the economy., \, D1 X; E1 f0 R6 k
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Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate( [0 `: R) F6 H- J
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
1 y3 v3 Z* x7 B; ?6 ~- A2 per cent inflation target in an environment of significant excess supply in Canada. Any further5 y# \6 ~# z( c3 w; d
reduction in monetary policy stimulus would need to be carefully considered.
m* A4 u, F$ N8 {" O1 {Information note:2 V9 P! b7 Z3 s t" M6 |
- s. P; Y$ f. z+ K( W" aThe next scheduled date for announcing the overnight rate target is 12 April 2011. |
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