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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.9 o# n% e8 j/ I/ E5 f; F/ V4 Q
0 ?; |; K, l: E3 mThe global economic recovery is proceeding broadly in line with the Bank's projection in its) Z6 J6 u {9 R
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
- R9 Q' R( B2 P$ Q. dsolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing& Y: o2 \- y- u2 x
challenges associated with sovereign and bank balance sheets will limit the pace of the European+ [2 R) g4 l" l1 a7 Q3 n- M/ a* w
recovery and are a significant source of uncertainty to the global outlook. Robust demand from
( f: v. k) v! D- y! ]) Uemerging-market economies is driving the underlying strength in commodity prices, which could
Q4 g7 u+ V& C: m( d5 Q* v7 Gbe further reinforced temporarily by supply shocks arising from recent geopolitical events.! T& i8 i$ o1 H! N( c- |* n: o
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The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of
$ A/ e' N# f& p; N' r- K4 _the anticipated rebalancing of demand. While consumption growth remains strong, there are, ~3 t3 I0 ]2 O" k2 ~
signs that household spending is moving more in line with the growth in household incomes. D) D( M; ]7 y* o
Business investment continues to expand rapidly as companies take advantage of stimulative0 }5 ^* {/ w! `, V' e' \7 L: `
financial conditions and respond to competitive imperatives. There is early evidence of a# H+ n$ M9 `! U
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.
) R p6 u7 C9 Z+ gHowever, the export sector continues to face considerable challenges from the cumulative effects
1 [+ T# L; \3 q2 [# c5 g$ ^. Mof the persistent strength in the Canadian dollar and Canada's poor relative productivity
+ ` @: n. k4 ~" M: @performance." Q9 j" d; R' M8 x+ _
' g! W* T. r" M _1 H) y0 t! pWhile global inflationary pressures are rising, inflation in Canada has been consistent with the- {! G- v) v) ]+ y6 ]+ s2 B& }
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the7 x/ D8 ]5 M( H. f
considerable slack in the economy.
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9 ?5 B) t( ?' h- Y7 }Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
: Z+ Y/ f& M7 V/ Pat 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the2 [7 J/ n K* b5 a
2 per cent inflation target in an environment of significant excess supply in Canada. Any further
1 K' R7 p& r; W2 v# S' Sreduction in monetary policy stimulus would need to be carefully considered.: [! k; l( U0 i9 M
Information note:. t; G1 Q' Q. K( W E, p
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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