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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 its
. N+ J8 H9 p! E. [0 B- ZJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
$ e% s0 B& V9 [+ |2 s( psolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
$ r( Q W& Z4 d9 @$ R; U1 E8 _challenges associated with sovereign and bank balance sheets will limit the pace of the European
9 |! Q' I* P/ x L' }2 Q( Brecovery and are a significant source of uncertainty to the global outlook. Robust demand from" M' x9 V3 I/ W- r! W+ ^) {7 y
emerging-market economies is driving the underlying strength in commodity prices, which could
?3 m& [6 z3 |0 i. S* ^0 cbe 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 H, d' L' c. G( {% p! ?, c
the anticipated rebalancing of demand. While consumption growth remains strong, there are3 b% y* [& c) {8 ^7 O
signs that household spending is moving more in line with the growth in household incomes.. B9 f; S6 p' z% {& J6 W; `
Business investment continues to expand rapidly as companies take advantage of stimulative
& \, S+ K5 m! k) ]6 Efinancial conditions and respond to competitive imperatives. There is early evidence of a" y( }" ]) @* Y3 @0 }
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.: c! W7 |3 r7 T6 s" Y7 R
However, the export sector continues to face considerable challenges from the cumulative effects. Y6 h6 i/ U# E, ^9 s5 o! l
of the persistent strength in the Canadian dollar and Canada's poor relative productivity
. C! c2 w8 A3 i" kperformance.
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3 o% Q* r/ n/ v$ F& rWhile global inflationary pressures are rising, inflation in Canada has been consistent with the
" J2 u& b5 Z5 J1 b- s/ D+ b! K' oBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
0 O0 \8 g/ x, q8 H% m3 o/ X5 y6 Pconsiderable slack in the economy.
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+ @7 _ g; M1 H1 t2 G) WReflecting all of these factors, the Bank has decided to maintain the target for the overnight rate: Q$ @+ P$ M4 G9 O
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the* U2 X* D h- p6 t# M( h# U+ m
2 per cent inflation target in an environment of significant excess supply in Canada. Any further8 j( [9 z7 l$ t( p: l: A g( ?0 [
reduction in monetary policy stimulus would need to be carefully considered.
" s3 s- x( D/ m8 P2 d1 BInformation note:. \( u+ _7 E3 a4 }0 J0 [! F
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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