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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. i, l! \0 F: ]% X$ K
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The global economic recovery is proceeding broadly in line with the Bank's projection in its
8 X4 i5 ^+ H. l8 FJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
( S, E( f1 Z9 X' \: z) wsolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing, |# l0 ~8 G$ A3 w \
challenges associated with sovereign and bank balance sheets will limit the pace of the European
0 e5 d9 ^" L5 u, d, frecovery and are a significant source of uncertainty to the global outlook. Robust demand from
" A6 f |6 z: h$ }+ z! ^emerging-market economies is driving the underlying strength in commodity prices, which could/ j8 r2 ]2 W3 p
be further reinforced temporarily by supply shocks arising from recent geopolitical events.% A- b0 \& ~3 a- M" a. w" C
0 F" f; L9 Z9 J+ j5 FThe recovery in Canada is proceeding slightly faster than expected, and there is more evidence of
) f& ]- `, _ T$ j5 u; @- pthe anticipated rebalancing of demand. While consumption growth remains strong, there are ~+ r4 }0 ~9 ?! C8 {6 C
signs that household spending is moving more in line with the growth in household incomes.1 }, \/ r6 l2 @8 t$ W
Business investment continues to expand rapidly as companies take advantage of stimulative
; X' _7 F/ U4 ~4 ? R$ g+ A4 _' Dfinancial conditions and respond to competitive imperatives. There is early evidence of a
4 d9 C; J/ j( J+ |recovery in net exports, supported by stronger U.S. activity and global demand for commodities.5 j6 V- A+ {2 n. x: B# h
However, the export sector continues to face considerable challenges from the cumulative effects
2 A; Q6 ?& s) y! V9 t: F0 Cof the persistent strength in the Canadian dollar and Canada's poor relative productivity
3 j# k6 D+ c' Aperformance.
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3 Z9 @- V v" t7 F8 b9 qWhile global inflationary pressures are rising, inflation in Canada has been consistent with the
+ [& H% W9 N4 h; c7 ?Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
6 g( M8 T7 n" `. oconsiderable slack in the economy./ t+ e3 T2 w. r1 L, p2 e& i
+ y7 J" N% _" N# U& E! F: T2 q- E- jReflecting all of these factors, the Bank has decided to maintain the target for the overnight rate) P3 k% d }) a6 D% b) P. V+ Z
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the0 ~3 ?7 b0 K6 d: s- H
2 per cent inflation target in an environment of significant excess supply in Canada. Any further
! E; S; Y) d: R- f1 Creduction in monetary policy stimulus would need to be carefully considered.0 x' T7 f3 X) f& i8 W# L; R- l
Information note: E7 s" `2 j5 h) X4 F
8 I4 {2 }0 r# R5 c' A% I2 m) f4 iThe next scheduled date for announcing the overnight rate target is 12 April 2011. |
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