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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 its7 x- u6 b; U; d3 s* w0 t$ ^7 v
January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is6 b7 |; b( n. k6 L4 ^- A
solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing G: j& r- |5 N. i2 |# g
challenges associated with sovereign and bank balance sheets will limit the pace of the European1 w) a; X9 {) ]- `# ~# V
recovery and are a significant source of uncertainty to the global outlook. Robust demand from; G* r, }+ f0 n+ ~: ]
emerging-market economies is driving the underlying strength in commodity prices, which could/ c, k3 o( v# U( [1 r
be further reinforced temporarily by supply shocks arising from recent geopolitical events.
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2 w5 x& x1 a9 h& }, b' mThe recovery in Canada is proceeding slightly faster than expected, and there is more evidence of5 ^6 Q4 W! ~2 F! Z, P( ]& q# ^
the anticipated rebalancing of demand. While consumption growth remains strong, there are
" Q% X$ C' o4 B1 l L2 i: b& m8 ]signs that household spending is moving more in line with the growth in household incomes.% V" n5 q7 R& j8 v
Business investment continues to expand rapidly as companies take advantage of stimulative+ u! E1 d1 X9 x. Q
financial conditions and respond to competitive imperatives. There is early evidence of a7 X; R- s) e/ c+ h
recovery in net exports, supported by stronger U.S. activity and global demand for commodities.: l# m2 x* C* Z- J# ^3 _
However, the export sector continues to face considerable challenges from the cumulative effects
' u b5 v; X. }8 R8 Eof the persistent strength in the Canadian dollar and Canada's poor relative productivity
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+ w2 W( u H- R( qWhile global inflationary pressures are rising, inflation in Canada has been consistent with the
7 i1 p$ V# K* }1 g+ H9 s8 }0 M$ N" UBank's expectations. Underlying pressures affecting prices remain subdued, reflecting the3 `5 P+ z7 m6 {$ v2 o+ n7 o/ M
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
5 E/ Z: U8 D' x" l xat 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the- m- ~! ?4 s; r" u( |0 K
2 per cent inflation target in an environment of significant excess supply in Canada. Any further
: ~: E7 O7 E0 [2 wreduction in monetary policy stimulus would need to be carefully considered.
: ?7 u9 E" U& y( AInformation note:9 n: Z2 a; P+ h5 l- n% f8 z
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The next scheduled date for announcing the overnight rate target is 12 April 2011. |
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