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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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The global economic recovery is proceeding broadly in line with the Bank's projection in its5 H" d9 N9 x8 a. M' ^$ N, G; _# B) U
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is/ ]' Z% k( I# q; x W
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing6 Q4 D |( A3 E3 b2 I
challenges associated with sovereign and bank balance sheets will limit the pace of the European6 h; Z. A; Y: T! _
recovery and are a significant source of uncertainty to the global outlook. Robust demand from& y- G0 i" z! k! t. v
emerging-market economies is driving the underlying strength in commodity prices, which could
6 f1 z3 h& r1 l0 m3 P i1 vbe further reinforced temporarily by supply shocks arising from recent geopolitical events. }+ R, i6 y3 G' C
: s; R4 V E; F. Y1 A' x/ g4 AThe recovery in Canada is proceeding slightly faster than expected, and there is more evidence of/ V9 ~% R3 g. b* w& o7 P
the anticipated rebalancing of demand. While consumption growth remains strong, there are3 S5 D/ K, c* ], M) X2 L) R
signs that household spending is moving more in line with the growth in household incomes.
X8 ~: h- N" p V0 L' i* ]' ~' FBusiness investment continues to expand rapidly as companies take advantage of stimulative+ b2 a4 v8 }$ g S
financial conditions and respond to competitive imperatives. There is early evidence of a9 Z1 ]$ Z$ X* l; u. b+ p& G
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.
6 l& ], ?3 C* n9 lHowever, the export sector continues to face considerable challenges from the cumulative effects
/ O. a. h7 z; J- q0 H* tof the persistent strength in the Canadian dollar and Canada's poor relative productivity
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6 w0 q( `2 ~& l5 ~) @While global inflationary pressures are rising, inflation in Canada has been consistent with the+ f7 t z* i1 E+ G
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
# k1 ~) C6 D5 H5 U& H2 Wconsiderable 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; n5 |( x7 G/ W/ U2 } U# ]
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
$ E( a G! e2 ]9 r$ i7 a' R2 per cent inflation target in an environment of significant excess supply in Canada. Any further; E" [- |1 t; ?6 s' E7 t0 Z
reduction in monetary policy stimulus would need to be carefully considered.2 A. J% L8 D: c, M) |. L
Information note: m. r" I2 D/ l
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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