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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
& W" p6 R$ H. g' C8 X* d: l, S) vJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
}! u! Y9 J5 I; G5 I' l$ H- i7 Osolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
. V4 J, ]0 t O, a2 E. @challenges associated with sovereign and bank balance sheets will limit the pace of the European
, h! J$ o2 T/ W9 a' Precovery and are a significant source of uncertainty to the global outlook. Robust demand from
) F5 ^& ]6 h% @+ N. I, demerging-market economies is driving the underlying strength in commodity prices, which could
7 Z: R6 m1 }# L u9 u9 t/ w, Sbe 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 of
. @; ~) {2 f3 Mthe anticipated rebalancing of demand. While consumption growth remains strong, there are
9 j) ]9 J# R: `2 |signs that household spending is moving more in line with the growth in household incomes.$ F- u( B! Z$ `6 ^! g
Business investment continues to expand rapidly as companies take advantage of stimulative
( I' N! U6 c8 W5 c2 lfinancial conditions and respond to competitive imperatives. There is early evidence of a5 F, N- J4 ]' J: J
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.
: J: M) ~, I7 DHowever, the export sector continues to face considerable challenges from the cumulative effects4 a6 F% _5 p9 y) R. g" x# g0 k
of the persistent strength in the Canadian dollar and Canada's poor relative productivity0 `$ J9 f# B4 a( F3 }& r/ k
performance.
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6 Y! O$ x: S1 o+ xWhile global inflationary pressures are rising, inflation in Canada has been consistent with the
: i6 d- P- W6 V9 X. L. cBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
0 B) @4 ~0 r' b# l& n5 kconsiderable 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: X$ ^; c6 @* m/ z
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
6 T8 C$ Z4 a2 T3 W, b+ r2 per cent inflation target in an environment of significant excess supply in Canada. Any further
+ U2 T; N% J6 U8 C" p, H. c8 Greduction in monetary policy stimulus would need to be carefully considered.8 S7 ?) ?- g! O' |4 }- K8 [3 ]& ~' P3 d
Information note:. K1 O+ y+ N& Q8 h0 a3 z
6 I. v5 P, |8 e$ v$ m; a& f5 Q( BThe next scheduled date for announcing the overnight rate target is 12 April 2011. |
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