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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 its2 V; `+ r; R9 d
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
/ a# O9 K5 n6 v6 Dsolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing" C6 X/ H O3 U* g
challenges associated with sovereign and bank balance sheets will limit the pace of the European
4 ^" ~ N7 t6 k, r4 ~6 Lrecovery and are a significant source of uncertainty to the global outlook. Robust demand from' h1 S+ J! s1 o" |; \
emerging-market economies is driving the underlying strength in commodity prices, which could" J6 ?' T4 }- y4 G2 H* r2 T! M
be further reinforced temporarily by supply shocks arising from recent geopolitical events.8 o1 R( l% Z5 w H0 V) n* d# V
9 @9 S5 N* d; d7 z6 V7 S3 U% eThe recovery in Canada is proceeding slightly faster than expected, and there is more evidence of! e3 S: V" \. ~
the anticipated rebalancing of demand. While consumption growth remains strong, there are% Z! w: X* Z% g/ z
signs that household spending is moving more in line with the growth in household incomes.1 J, T8 T. N: L, }. v* o
Business investment continues to expand rapidly as companies take advantage of stimulative
2 H, b* V1 I$ C0 T ?% afinancial conditions and respond to competitive imperatives. There is early evidence of a; ~+ P- {; o+ q; ?; j* W
recovery in net exports, supported by stronger U.S. activity and global demand for commodities." f+ j2 }; e4 `) G
However, the export sector continues to face considerable challenges from the cumulative effects: Y' Q* f! f: y+ {2 \$ Y6 M
of the persistent strength in the Canadian dollar and Canada's poor relative productivity6 o$ Z& F1 h5 w6 S1 d2 h [8 ]% R
performance./ G$ \% R& G. P8 ~/ |( a
4 r8 e# U" I4 r: I& Q) `While global inflationary pressures are rising, inflation in Canada has been consistent with the
- }3 ?. _8 i0 |/ OBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
1 I* K% M8 ^) vconsiderable 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/ M' R) Y+ {3 b/ w6 K5 c8 p! l
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
" Z; [; _( N. n$ M9 y0 \( _' V9 g; x# M% c2 per cent inflation target in an environment of significant excess supply in Canada. Any further) k j8 ~ s% x
reduction in monetary policy stimulus would need to be carefully considered. j5 q# N# O- u- w: n
Information note:
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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