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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.3 M/ q& s- j8 r! }* v
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The global economic recovery is proceeding broadly in line with the Bank's projection in its
, }9 O; y3 Z& n8 c d5 LJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is9 p7 q6 {- N' ?& V H, L: [: c
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing0 X; @* \( M% s
challenges associated with sovereign and bank balance sheets will limit the pace of the European: y! t. e3 M6 `* k# N! h" }
recovery and are a significant source of uncertainty to the global outlook. Robust demand from" ]. W9 A5 p6 i: h' B8 s
emerging-market economies is driving the underlying strength in commodity prices, which could
8 R+ u( a1 T- _1 e2 z; Y6 ube further reinforced temporarily by supply shocks arising from recent geopolitical events.- Q! a8 V1 v. _+ j' G9 S
9 O6 E. D0 w- i( o8 R8 s& RThe recovery in Canada is proceeding slightly faster than expected, and there is more evidence of4 d+ K" j4 F9 ^# P4 ^3 N* G
the anticipated rebalancing of demand. While consumption growth remains strong, there are9 V: D( l! Y) A a+ |1 l1 U0 l2 d
signs that household spending is moving more in line with the growth in household incomes.
3 _% n6 W! S' T- G; E/ d$ QBusiness investment continues to expand rapidly as companies take advantage of stimulative+ r _1 K6 E# L# C
financial conditions and respond to competitive imperatives. There is early evidence of a$ g6 M' D4 ?0 Q
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.
6 I7 M5 E7 m# Y* O FHowever, the export sector continues to face considerable challenges from the cumulative effects
1 l7 ~/ {! c1 R3 N# j1 {of the persistent strength in the Canadian dollar and Canada's poor relative productivity, d/ F F d1 Z. j+ w
performance.8 h/ A6 p7 t) w6 E9 A1 _
* e0 `) ]0 D+ l( z* q0 [While global inflationary pressures are rising, inflation in Canada has been consistent with the5 l6 b& ]! ?0 y/ r/ A" l! Q `
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the P6 m1 p6 Y" e0 b+ q j
considerable slack in the economy.( ~, r! K3 y9 w0 m* r X) U5 G# C
1 s5 S, t- Y/ _# m9 F4 RReflecting all of these factors, the Bank has decided to maintain the target for the overnight rate1 t$ [" V* j5 D
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the" M' ^" G7 @9 {; h6 |
2 per cent inflation target in an environment of significant excess supply in Canada. Any further
- B2 }/ e6 k, s3 X* ]6 ^* M4 ~7 Jreduction in monetary policy stimulus would need to be carefully considered./ ]! t0 C/ A( w: v% ?
Information note:
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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