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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.
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' @- R7 n8 ~$ HThe global economic recovery is proceeding broadly in line with the Bank's projection in its
: j5 T- b) `, _5 ]3 [) v; dJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is) |/ D! B8 y0 R# h, { H
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
; Q4 A/ P( T$ x; i. }2 Xchallenges associated with sovereign and bank balance sheets will limit the pace of the European
+ m# p2 Y7 Q- I2 l6 ?- [9 {) Lrecovery and are a significant source of uncertainty to the global outlook. Robust demand from
# U) ^7 {& R& t3 c, R& Lemerging-market economies is driving the underlying strength in commodity prices, which could
9 R! x7 F# {5 C" Kbe 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( O- n# D& @6 d) Z
the anticipated rebalancing of demand. While consumption growth remains strong, there are
4 d$ ~2 y) }: h! a: Vsigns that household spending is moving more in line with the growth in household incomes.5 T) B2 n* O' g2 L* V% K/ G6 Y
Business investment continues to expand rapidly as companies take advantage of stimulative7 X3 U$ f6 a* k* t A
financial conditions and respond to competitive imperatives. There is early evidence of a) `* N( b; U6 i( {1 C8 ~5 h
recovery in net exports, supported by stronger U.S. activity and global demand for commodities./ V8 t2 a- Q" `- _0 O
However, the export sector continues to face considerable challenges from the cumulative effects! y% ]$ [; U7 J$ e6 h. P8 G4 V/ u6 ?, @
of the persistent strength in the Canadian dollar and Canada's poor relative productivity
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While global inflationary pressures are rising, inflation in Canada has been consistent with the
! d3 P1 A: Y# L4 f, lBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
) s5 J$ _, f6 q! ~, wconsiderable slack in the economy.# X; [# ?3 C* t( j7 E( B% L L1 ^
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Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
0 u. k S# k+ g6 _at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
( c: o/ x% B, c' I7 N5 ^6 T2 per cent inflation target in an environment of significant excess supply in Canada. Any further
7 B9 i4 J2 T/ i9 B2 @reduction in monetary policy stimulus would need to be carefully considered.0 g- I) ?; M: C3 M
Information note:
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, q& Y+ d/ O/ LThe next scheduled date for announcing the overnight rate target is 12 April 2011. |
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