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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
& I1 o3 D8 @ p! S1 D5 A0 ]January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is* l, e Y6 [! S
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing; V s# c G; c! `; L
challenges associated with sovereign and bank balance sheets will limit the pace of the European
% s1 l4 g2 z% ]0 ?, erecovery and are a significant source of uncertainty to the global outlook. Robust demand from9 Z5 D( `$ W" o$ v9 x$ |% j
emerging-market economies is driving the underlying strength in commodity prices, which could
( U3 ?& A+ ^: z( Y6 S2 u8 mbe further reinforced temporarily by supply shocks arising from recent geopolitical events.
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& P" V: r2 P$ |6 P/ j% DThe recovery in Canada is proceeding slightly faster than expected, and there is more evidence of+ N& e, ~& T+ C( t0 _/ m
the anticipated rebalancing of demand. While consumption growth remains strong, there are
$ C d" S1 O* [3 a; o6 nsigns that household spending is moving more in line with the growth in household incomes.
4 r! ~' v; y( @Business investment continues to expand rapidly as companies take advantage of stimulative6 F: r' y8 y4 h2 m G8 M
financial conditions and respond to competitive imperatives. There is early evidence of a) | o& I: S/ y3 @$ E9 m
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.& {# d" g* j9 i
However, the export sector continues to face considerable challenges from the cumulative effects
' \& h2 p m" P9 w0 dof the persistent strength in the Canadian dollar and Canada's poor relative productivity
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While global inflationary pressures are rising, inflation in Canada has been consistent with the
& X# z- ?) B3 p/ ?! C3 g/ F6 yBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
' r6 j9 ]& I7 ~) ?considerable slack in the economy.9 l% e% v9 t2 o3 a
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Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
+ u$ e( r. c0 B4 U; b) I! Mat 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
% V/ F1 e8 d3 \5 z6 Y: Q# Z2 per cent inflation target in an environment of significant excess supply in Canada. Any further
' D& v2 F/ I% F% L3 I3 rreduction in monetary policy stimulus would need to be carefully considered.
6 p6 G T* E: T- PInformation note:4 Q! s. |$ ^: `" m
0 {; n; e1 e/ c# TThe next scheduled date for announcing the overnight rate target is 12 April 2011. |
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