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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
9 \; w& c2 i/ t) L! ~2 J! l aJanuary Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is
; _. H8 B1 A& P5 C5 [3 [solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing; P$ E k: o" G. Q( u7 s
challenges associated with sovereign and bank balance sheets will limit the pace of the European
% ?$ z r7 \3 S* B5 I, Urecovery and are a significant source of uncertainty to the global outlook. Robust demand from
/ S& B' F$ c& u* {' U+ W+ r Y* g" d& }emerging-market economies is driving the underlying strength in commodity prices, which could
! a* s% A1 r7 m" I; ^# [ E) xbe further reinforced temporarily by supply shocks arising from recent geopolitical events.
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: J8 ]" c4 V4 j" yThe recovery in Canada is proceeding slightly faster than expected, and there is more evidence of7 F) P( w: ?8 b" f2 H( N& `
the anticipated rebalancing of demand. While consumption growth remains strong, there are0 ?* i) W |" \) I* n
signs that household spending is moving more in line with the growth in household incomes.
6 L5 F- O1 H' t' lBusiness investment continues to expand rapidly as companies take advantage of stimulative5 F0 R4 r) \0 T; h4 ]
financial conditions and respond to competitive imperatives. There is early evidence of a
& w, _5 B* G+ Krecovery in net exports, supported by stronger U.S. activity and global demand for commodities.( m- T* K" J5 s& @* [- e1 A, Q
However, the export sector continues to face considerable challenges from the cumulative effects, M4 A2 m$ g, R' V) k& t" C
of the persistent strength in the Canadian dollar and Canada's poor relative productivity# P9 ]9 T# o! ^/ i. w1 h
performance.6 H& ^5 g; `: Q: J8 G0 i
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While global inflationary pressures are rising, inflation in Canada has been consistent with the2 ~" J7 X3 y9 b# M% K9 @, ?
Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the) E; g2 I s, U% f$ i0 H# l+ `- v
considerable 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! B; ]0 s X) R5 C% Y- Q8 i* T
at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the1 T2 Q" g; q; _! J6 t* Y9 _- I7 S2 s
2 per cent inflation target in an environment of significant excess supply in Canada. Any further2 v5 _9 d9 l2 i5 @
reduction in monetary policy stimulus would need to be carefully considered.
, I# }: {) i/ r2 @% _+ V$ s9 sInformation note:
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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