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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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% K% F1 ?0 ?/ u: J# o4 {7 N. pThe global economic recovery is proceeding broadly in line with the Bank's projection in its$ O% U3 ~8 J+ W* Y' Z6 F" e
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is+ r- R. o I, c7 }, h) z; h0 D$ X
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing
/ \8 {9 \% c7 J) {1 i1 i" Wchallenges associated with sovereign and bank balance sheets will limit the pace of the European( y. t# ~, Q2 N2 [! ?0 {) X1 L ~5 p
recovery and are a significant source of uncertainty to the global outlook. Robust demand from
% {/ ~6 v, r! o% F$ V0 t$ c9 u; Yemerging-market economies is driving the underlying strength in commodity prices, which could* K ~, L3 O! F' d; u# @8 Q- ]8 P
be further reinforced temporarily by supply shocks arising from recent geopolitical events.
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# N* P5 ~. [! V, M% LThe recovery in Canada is proceeding slightly faster than expected, and there is more evidence of
. x2 W2 [+ b2 K. ?: u8 c- Tthe anticipated rebalancing of demand. While consumption growth remains strong, there are6 A& V, U, G& p
signs that household spending is moving more in line with the growth in household incomes.% |: Q$ X" D+ S6 [7 ~
Business investment continues to expand rapidly as companies take advantage of stimulative
# ]* E3 f5 c5 p+ V8 X6 L) wfinancial conditions and respond to competitive imperatives. There is early evidence of a
" z7 [% Q7 L" Arecovery in net exports, supported by stronger U.S. activity and global demand for commodities.
. G2 C9 D6 F& `/ b' W: F' yHowever, the export sector continues to face considerable challenges from the cumulative effects
1 o- h6 \$ G* Z, z. Z* @2 ^of the persistent strength in the Canadian dollar and Canada's poor relative productivity
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" o9 c. b- g/ @+ [While global inflationary pressures are rising, inflation in Canada has been consistent with the" v% Q0 ?0 v$ }& v) w
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the
* Y3 @; |# V# {: [& H; z; Iconsiderable slack in the economy.( t+ j' |& L) E; c# E
; [; W. q7 d% P/ n! F' PReflecting all of these factors, the Bank has decided to maintain the target for the overnight rate
, v7 {# L) I9 y& _; `at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the, K. H* f4 n# r6 y& B: L
2 per cent inflation target in an environment of significant excess supply in Canada. Any further
3 K1 L! w& b/ Breduction in monetary policy stimulus would need to be carefully considered.
4 ~4 A* `" Z/ y5 G9 i& Q# ^& p5 t( LInformation note:
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9 ]7 v7 A1 k- k8 {, d' P& ?The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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