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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.6 P' ]' c p& ^" v5 a/ l3 K
, x. A# Y8 r/ v. s6 ^The global economic recovery is proceeding broadly in line with the Bank's projection in its
6 D9 y: _7 u7 m" q+ p" X# ]January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is4 K( l u6 c9 m+ ?! T
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing" {3 \* l" S. G2 ~
challenges associated with sovereign and bank balance sheets will limit the pace of the European
/ ]3 M; ^! K) K' p8 Y4 A7 b6 Z8 b6 Grecovery and are a significant source of uncertainty to the global outlook. Robust demand from+ b% `# ?7 I* l3 k
emerging-market economies is driving the underlying strength in commodity prices, which could
, |% b0 T; C6 Xbe further reinforced temporarily by supply shocks arising from recent geopolitical events.2 h: X7 E1 D: J/ j) g X7 S$ w
$ M& a0 u+ L& f. d$ ZThe recovery in Canada is proceeding slightly faster than expected, and there is more evidence of
$ Z3 z# U9 m8 F2 athe anticipated rebalancing of demand. While consumption growth remains strong, there are# ~. b) i3 Q+ Z" J$ A* n, e
signs that household spending is moving more in line with the growth in household incomes.
8 n5 U- \. ^. V3 D4 ~( ^Business investment continues to expand rapidly as companies take advantage of stimulative
- Y; h. W) d& s( g ofinancial conditions and respond to competitive imperatives. There is early evidence of a
$ r3 W6 B, V% ]% Grecovery in net exports, supported by stronger U.S. activity and global demand for commodities.
# r0 i' f# u$ M' F* K% V0 aHowever, the export sector continues to face considerable challenges from the cumulative effects
, I& U) F; R/ |- gof the persistent strength in the Canadian dollar and Canada's poor relative productivity
8 z1 t% U& P$ Q2 A% Fperformance.
, J9 a# o4 Q' m+ M0 I. _# d- d( l( m* a0 s% q
While global inflationary pressures are rising, inflation in Canada has been consistent with the
+ E4 u, G& f2 B2 \! PBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the* G5 r! _0 X0 Y: L6 a9 b
considerable slack in the economy.
# O" I* N3 u0 T: r- j/ y$ I4 a/ p2 I+ m0 y+ n* C6 T. _* B( D- A
Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
) k+ n7 c- W' ]+ O8 p( r% ?3 `at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
4 y/ b' @. o- b' J2 per cent inflation target in an environment of significant excess supply in Canada. Any further7 b) _1 a Q/ @ u
reduction in monetary policy stimulus would need to be carefully considered.- V" m! P- Y6 k( d$ z7 N, I) ^% p
Information note:& A* H: O+ k* i4 z7 m2 c
+ [+ _$ d g R- v1 G; g6 W# z2 l' w; {The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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