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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.5 ?! d e2 i2 _# ^" o. E
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The global economic recovery is proceeding broadly in line with the Bank's projection in its1 j' }- j: c# e5 u' ^: D/ g
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is; p- B4 r9 }' |( M' ?
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing o8 y# L% {, r1 N1 W- b
challenges associated with sovereign and bank balance sheets will limit the pace of the European
- ~0 b, p% k8 W$ q# D! P, O# m" arecovery and are a significant source of uncertainty to the global outlook. Robust demand from
4 D/ L( x8 p @- R1 f S* ]emerging-market economies is driving the underlying strength in commodity prices, which could8 q# d" M$ G$ x) [$ l
be further reinforced temporarily by supply shocks arising from recent geopolitical events.
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+ N/ g0 B* G( R5 G+ g# U( OThe recovery in Canada is proceeding slightly faster than expected, and there is more evidence of" i" d' e5 s$ _ M$ A
the anticipated rebalancing of demand. While consumption growth remains strong, there are5 p! D' {- y5 P. v0 ?
signs that household spending is moving more in line with the growth in household incomes.
$ P& X+ L/ F; c% t; ~) L! [; V1 QBusiness investment continues to expand rapidly as companies take advantage of stimulative. Y9 D# u& R, J! K, g6 e" _' m3 y
financial conditions and respond to competitive imperatives. There is early evidence of a
8 I* G& a$ S. d' t" s9 x9 xrecovery in net exports, supported by stronger U.S. activity and global demand for commodities.
2 s. H# ^1 d% b7 _# N v, `' qHowever, the export sector continues to face considerable challenges from the cumulative effects
! e3 k( i; h0 w& T: P2 m$ nof the persistent strength in the Canadian dollar and Canada's poor relative productivity
, j6 H# b4 A0 X- b( vperformance.
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While global inflationary pressures are rising, inflation in Canada has been consistent with the
) G9 z2 d. U: e2 z/ E+ T2 I3 w0 \Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the f0 F( z0 f0 l! p# w9 P8 q
considerable slack in the economy.
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- S* |! c0 m% \2 B0 p1 D/ K' A- \Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
6 J/ I$ o( z# A3 ?6 W: Fat 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
; _* _9 h7 b8 p6 M7 q7 h, n! }2 per cent inflation target in an environment of significant excess supply in Canada. Any further
S- A0 J8 N5 Qreduction in monetary policy stimulus would need to be carefully considered., H4 _9 J# B7 G! t; \
Information note:8 M/ z/ b* @' I4 y
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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