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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.8 E# M$ p( L+ e
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The global economic recovery is proceeding broadly in line with the Bank's projection in its
& h/ ^. Y" U+ B/ ZJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
# d9 H- G( F9 P5 g8 nsolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
2 }7 b) W9 m8 K) x5 F2 T/ t! J1 Qchallenges associated with sovereign and bank balance sheets will limit the pace of the European% s( I4 S# e1 T5 Z# s
recovery and are a significant source of uncertainty to the global outlook. Robust demand from
7 [! q& T5 z! s2 F7 W3 xemerging-market economies is driving the underlying strength in commodity prices, which could
1 t6 y0 \! I) R6 _be further reinforced temporarily by supply shocks arising from recent geopolitical events.6 d9 e3 C- b: t9 [9 H8 H# `$ r
4 q9 N( M/ q& V- ^# {9 ?' YThe recovery in Canada is proceeding slightly faster than expected, and there is more evidence of
! ^# H( [- w s' D& J! M* ithe anticipated rebalancing of demand. While consumption growth remains strong, there are
* Y6 }# l- @6 n' H0 Z) wsigns that household spending is moving more in line with the growth in household incomes.0 Y; A3 M! E3 a& t/ v. h+ K
Business investment continues to expand rapidly as companies take advantage of stimulative
4 @$ U+ v# U( k0 a' e. s+ n4 |financial conditions and respond to competitive imperatives. There is early evidence of a% y$ U" I4 {5 V. M+ H3 s
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.
7 c Q3 [% X+ D: |2 M4 BHowever, the export sector continues to face considerable challenges from the cumulative effects
+ A7 h1 Z- {6 ^. R3 p2 vof the persistent strength in the Canadian dollar and Canada's poor relative productivity: g* A+ [6 Q% P
performance.% a% v/ l, N/ d; {; O5 L1 L
; m& U1 l# j8 m {. cWhile global inflationary pressures are rising, inflation in Canada has been consistent with the
* G5 T2 U, G3 r$ K% H: _Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the: T: j9 n! V3 A* s
considerable slack in the economy.- w& E4 U: c- z
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Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate/ @; ^! g7 T9 _- b/ C8 B5 o
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
3 |* I6 ?! \4 j b1 O) o2 per cent inflation target in an environment of significant excess supply in Canada. Any further! F: j4 n5 q' `; d7 x; s1 ~
reduction in monetary policy stimulus would need to be carefully considered.
7 F& U2 z0 Z1 x/ S* R! h3 iInformation note:# s6 h$ x% q( e6 A
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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