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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 R* _9 n- z# ?9 \/ V% a3 k, h; e& Y4 Q
+ j2 h, Z6 ~2 @5 o: ^The global economic recovery is proceeding broadly in line with the Bank's projection in its
x! C# V6 u1 l- B5 o% ^7 h S- p. ^; _January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is5 f: _8 }2 S, Q
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing8 O$ K/ A, m( x$ m" q' C7 `" t6 \
challenges associated with sovereign and bank balance sheets will limit the pace of the European; \ B: p. \' v8 f
recovery and are a significant source of uncertainty to the global outlook. Robust demand from
/ c+ D% H; K$ @) H$ g, Gemerging-market economies is driving the underlying strength in commodity prices, which could; i& t* O; J5 l- q6 H
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: X1 u7 l5 c% n3 {. R# x
the anticipated rebalancing of demand. While consumption growth remains strong, there are! J O7 M2 A8 |- |+ u
signs that household spending is moving more in line with the growth in household incomes.
4 x4 K9 ^/ }6 Z' X* cBusiness investment continues to expand rapidly as companies take advantage of stimulative
/ n) z0 C" {# K! r& e. hfinancial conditions and respond to competitive imperatives. There is early evidence of a5 r; i; @, \5 G E. d1 w1 |; f
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.
8 k# k% [. X1 n4 @5 u6 w3 @/ p6 dHowever, the export sector continues to face considerable challenges from the cumulative effects$ N, u7 b6 a' c, T) O# A* {
of the persistent strength in the Canadian dollar and Canada's poor relative productivity1 {: I6 z' S& u4 e" D! c0 i
performance.# W8 `& i" D5 b0 `
M0 ]1 ~: x) _! S NWhile global inflationary pressures are rising, inflation in Canada has been consistent with the$ a" M# [6 U6 x4 q, d
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
5 M8 V" E( I t8 j7 Xconsiderable slack in the economy.
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1 X3 g! L) D, jReflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
9 C4 O0 k( h) R/ \5 X' ]+ P+ wat 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
3 j" \9 V1 G; @7 d2 per cent inflation target in an environment of significant excess supply in Canada. Any further
8 Z9 `0 D" |* R9 creduction in monetary policy stimulus would need to be carefully considered.4 [# X* I' n3 @" W* ?( |
Information note:
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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