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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.1 c0 L1 s- P) | W8 t' x% x
. `$ U& b; q: D: RThe global economic recovery is proceeding broadly in line with the Bank's projection in its. }" o* p5 y- y/ a) \
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is. @! R( s0 e- I3 J4 E$ i
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
+ j5 I4 @& D* q$ w% Lchallenges associated with sovereign and bank balance sheets will limit the pace of the European, p" n M$ |, G( P- @9 [. G
recovery and are a significant source of uncertainty to the global outlook. Robust demand from
4 ^* x n& c& H: w/ Yemerging-market economies is driving the underlying strength in commodity prices, which could
5 A$ K* W: `& u5 ~8 W9 e' R2 Ybe further reinforced temporarily by supply shocks arising from recent geopolitical events.
6 J2 I/ W, y* H' z2 S i `0 I- ~$ @. P$ ~ c& y2 ?
The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of% H' Q! R( M f0 w1 e+ {
the anticipated rebalancing of demand. While consumption growth remains strong, there are
* r7 v; {- ~" I9 isigns that household spending is moving more in line with the growth in household incomes.
2 M+ T. R. z( }/ v1 R: R- u; b! c, gBusiness investment continues to expand rapidly as companies take advantage of stimulative! j& S! c2 o0 Z+ O0 M
financial conditions and respond to competitive imperatives. There is early evidence of a
5 D9 B# u' ]/ ~recovery in net exports, supported by stronger U.S. activity and global demand for commodities.6 m5 O5 J3 b( |" g0 g1 B- G U
However, the export sector continues to face considerable challenges from the cumulative effects) Q8 I! o+ c! M! x/ t8 O0 |1 P2 Q
of the persistent strength in the Canadian dollar and Canada's poor relative productivity
7 g6 g& K" M0 l6 Y4 W) {$ Jperformance.+ Z% J. T' Z3 B$ o! H
. i( N4 h6 i2 r0 x! hWhile global inflationary pressures are rising, inflation in Canada has been consistent with the/ t( s- _: M2 W% B
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
1 a& N1 Q5 n! C. d) e1 b' Iconsiderable slack in the economy.6 \4 H5 U, U: y; F9 ~1 ?
! Q2 I/ T5 ~ G. r3 {Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
9 k$ N/ M, w* f7 [( m( |at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the& p0 r" J) T4 X8 r1 H3 c/ z
2 per cent inflation target in an environment of significant excess supply in Canada. Any further( r+ s" g) ^1 r9 Y4 p, D c3 V9 i( B
reduction in monetary policy stimulus would need to be carefully considered.
- ` z5 G4 a* S8 y6 S; RInformation note:$ ?3 E# V0 K1 X1 H$ f
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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