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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.1 S. K' f% f" H2 g) b4 S" j0 ]" Q
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The global economic recovery is proceeding broadly in line with the Bank's projection in its4 M9 D4 h+ z1 S6 y, n
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
" m$ a% Q7 x$ l) _# Q' @: Psolidifying and remains supported by stimulative fiscal and monetary policies. Ongoing- N3 d% p, A+ t
challenges associated with sovereign and bank balance sheets will limit the pace of the European
$ ~9 T% g: [% p- B* Frecovery and are a significant source of uncertainty to the global outlook. Robust demand from$ K; ~2 ?% n* W0 p5 C# w3 \ p2 S2 n
emerging-market economies is driving the underlying strength in commodity prices, which could4 j4 U$ O: X& \" U2 O
be further reinforced temporarily by supply shocks arising from recent geopolitical events.5 k* Q+ c8 Y* ~2 k( ?1 E- y p: e
' q6 X' ?) f0 j: ~The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of! G2 q) h7 x& [& }2 R; c7 h
the anticipated rebalancing of demand. While consumption growth remains strong, there are
- o/ K; ~* a4 h5 h! Z1 E% y1 ]signs that household spending is moving more in line with the growth in household incomes.) e4 @* @1 D ^ N: s7 @& o1 G
Business investment continues to expand rapidly as companies take advantage of stimulative' k: L) J0 v/ p& m8 z
financial conditions and respond to competitive imperatives. There is early evidence of a- n% M7 p- G5 [9 [
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.$ \, y0 @) D8 P2 { R* J
However, the export sector continues to face considerable challenges from the cumulative effects
! _2 A+ f5 {- j' e& b) ~/ Rof the persistent strength in the Canadian dollar and Canada's poor relative productivity$ a6 A8 q: I8 ?9 i! Z* H
performance.1 v# N! `- W4 c2 `
1 f6 g+ ]' Q' C/ BWhile global inflationary pressures are rising, inflation in Canada has been consistent with the
k% i q$ r; X L/ {( A* e. M9 h4 lBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
$ B4 t# a! Q: a( [* M& vconsiderable slack in the economy.
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2 ?0 U% m# m1 D+ d6 f, nReflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
/ i4 U7 u7 }: E4 G& |& y! v- Uat 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the
P4 ~; w6 x$ n& L+ [: u2 per cent inflation target in an environment of significant excess supply in Canada. Any further
* S9 m6 Z D# G0 }reduction in monetary policy stimulus would need to be carefully considered.' B4 V" N1 i3 p! {
Information note:
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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