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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 q/ r' G8 W" Z" v4 ~- O7 X8 s
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The global economic recovery is proceeding broadly in line with the Bank's projection in its1 c: P6 ~4 k' S" S4 E
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is2 G: ?+ v! s# ^" p4 U
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
4 e1 M! C5 j0 c8 b/ e& nchallenges associated with sovereign and bank balance sheets will limit the pace of the European
3 K8 o) R. Z4 q( W4 D5 L; Z( grecovery and are a significant source of uncertainty to the global outlook. Robust demand from
) R) t% e. e( Q5 E1 N$ U' Yemerging-market economies is driving the underlying strength in commodity prices, which could
C2 D u1 f$ a& tbe 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 of4 C( g: a4 z. v# _ Q9 L
the anticipated rebalancing of demand. While consumption growth remains strong, there are$ ~4 z" T0 c" v8 p+ q% j* \
signs that household spending is moving more in line with the growth in household incomes.! C, x$ V' P# p; B0 c8 \3 t/ O
Business investment continues to expand rapidly as companies take advantage of stimulative! F8 a/ I6 Q: J: n% G) R8 x
financial conditions and respond to competitive imperatives. There is early evidence of a
. v; I. `$ @+ V) y8 d; V) X& Z% Nrecovery in net exports, supported by stronger U.S. activity and global demand for commodities.
4 Q+ D. `& y1 b6 g8 ^: MHowever, the export sector continues to face considerable challenges from the cumulative effects. l' `/ A. j8 S0 v) C' s
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 l! U5 ~7 B, b4 m! ~3 o N
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the$ ^2 U8 v- p* W+ _# Z( i+ B1 Y
considerable slack in the economy.
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Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate; X9 |& x" [3 k
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the: H F% |4 ?* v7 o; ?6 X0 U
2 per cent inflation target in an environment of significant excess supply in Canada. Any further# @( h7 o: r" b& d
reduction in monetary policy stimulus would need to be carefully considered.
/ i) W) m- D% B. Q" P5 dInformation note:
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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