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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.' ^0 x2 ~2 [7 P4 Z8 h
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The global economic recovery is proceeding broadly in line with the Bank's projection in its
$ H' E( N$ _! v/ B4 ^" c4 UJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is* j- N0 K9 A- |7 C- n8 w0 q* k5 K# k5 O
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
5 c3 t4 c* ]* R$ Schallenges associated with sovereign and bank balance sheets will limit the pace of the European
/ ?, r& Q/ h. `! [" N* Z5 wrecovery and are a significant source of uncertainty to the global outlook. Robust demand from3 ]* k3 P; l" g( P, f
emerging-market economies is driving the underlying strength in commodity prices, which could
& _4 N: ?9 c+ m- @be further reinforced temporarily by supply shocks arising from recent geopolitical events.
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) P7 H$ V d W/ j. e1 M) u, sThe recovery in Canada is proceeding slightly faster than expected, and there is more evidence of O$ ^$ r& Z8 |5 s" ^, n6 ?( n8 q: `
the anticipated rebalancing of demand. While consumption growth remains strong, there are
, ?, I. V" h7 p( H, t isigns that household spending is moving more in line with the growth in household incomes.1 l8 t2 ?* M+ @! ~( j$ u
Business investment continues to expand rapidly as companies take advantage of stimulative! W) I/ u% l: ?# D; p
financial conditions and respond to competitive imperatives. There is early evidence of a
, x4 h+ s" T3 C& ]* Precovery in net exports, supported by stronger U.S. activity and global demand for commodities. U l2 g8 I. s) G. Z. R
However, the export sector continues to face considerable challenges from the cumulative effects3 E! t% c* S" a& }' W
of the persistent strength in the Canadian dollar and Canada's poor relative productivity
" M# Z' m5 L i0 f* m0 N. operformance.
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2 i4 n1 V' g7 Q8 J. i$ Z# ~- RWhile global inflationary pressures are rising, inflation in Canada has been consistent with the
j. @9 Y! {$ v4 Q" XBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the3 D( w% F2 N$ e& A
considerable slack in the economy.
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! l0 ^. Y! k6 p# A6 m2 k. RReflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
" m' V- X/ E+ h3 e6 X; Sat 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the8 H7 u$ z3 R) a. \5 G$ z
2 per cent inflation target in an environment of significant excess supply in Canada. Any further. h: {* z: C, x( F' b/ O
reduction in monetary policy stimulus would need to be carefully considered.1 M3 T/ [" Z$ j7 `
Information note:1 A. U) x7 Z9 T$ f0 X; N4 h
. Y, c7 a5 ?+ J3 M* n1 D8 pThe next scheduled date for announcing the overnight rate target is 12 April 2011. |
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