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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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6 Q' r' x2 e0 z4 _1 C! a: J/ mThe global economic recovery is proceeding broadly in line with the Bank's projection in its! R2 m Q0 _: @( ]' }6 q
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
( L: {) J! F5 B" ]+ zsolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
# G1 q6 Y( @/ V' |" M3 }: s$ \challenges associated with sovereign and bank balance sheets will limit the pace of the European
4 D& Y% i" V1 Arecovery and are a significant source of uncertainty to the global outlook. Robust demand from
+ ~. l+ c1 G$ r* c; Oemerging-market economies is driving the underlying strength in commodity prices, which could4 Z$ k; t# A; S' j! W
be further reinforced temporarily by supply shocks arising from recent geopolitical events.
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The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of
# S6 t3 v( G& Z" N" Zthe anticipated rebalancing of demand. While consumption growth remains strong, there are
* u* }7 `6 Z& U9 b- vsigns that household spending is moving more in line with the growth in household incomes.; m; `3 n5 g) _- S
Business investment continues to expand rapidly as companies take advantage of stimulative
8 c0 k7 x6 p2 \, M* Q& L3 y7 wfinancial conditions and respond to competitive imperatives. There is early evidence of a1 Y5 v% T. V4 m. P
recovery in net exports, supported by stronger U.S. activity and global demand for commodities. d' k) N7 r! p0 ]
However, the export sector continues to face considerable challenges from the cumulative effects
$ d# {* @1 N3 [# G4 ]( S C8 |of the persistent strength in the Canadian dollar and Canada's poor relative productivity
0 g% p. {0 A- h$ t: t# j+ Bperformance.
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; q! ~0 |' u* K; m5 E" [% [While global inflationary pressures are rising, inflation in Canada has been consistent with the
" {1 I3 `/ A, W9 z @. b% }/ \$ o: ~Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the5 b% Q' A7 R) P
considerable slack in the economy.
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Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
: `! G- B0 F* s! {, M# ~at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the; z% l' `8 z: |7 H( D) D4 Z7 _
2 per cent inflation target in an environment of significant excess supply in Canada. Any further
2 G% ~0 {! M. I2 A8 `reduction in monetary policy stimulus would need to be carefully considered.
' O- ?& N4 j3 _8 o& c3 S" \& f# a3 SInformation note:0 N8 @# ?3 ?9 d6 ?7 Z; Z( n/ p
% z8 U/ s1 D6 I4 p0 L7 E v( H# {0 X! B# IThe next scheduled date for announcing the overnight rate target is 12 April 2011. |
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