Bank of Canada maintains overnight rate target at 1 per cent on March 1

OTTAWA  March 1 2011– 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.

The global economic recovery is proceeding broadly in line with the Bank’s projection in its January Monetary Policy Report (MPR), although risks remain elevated.  U.S. activity is solidifying and remains supported by stimulative fiscal and monetary policies.  Ongoing challenges associated with sovereign and bank balance sheets will limit the pace of the European recovery and are a significant source of uncertainty to the global outlook. Robust demand from emerging-market economies is driving the underlying strength in commodity prices, which could be further reinforced temporarily by supply shocks arising from recent geopolitical events.

The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of the anticipated rebalancing of demand.  While consumption growth remains strong, there are signs that household spending is moving more in line with the growth in household incomes. Business investment continues to expand rapidly as companies take advantage of stimulative financial conditions and respond to competitive imperatives.  There is early evidence of a recovery in net exports, supported by stronger U.S. activity and global demand for commodities. However, the export sector continues to face considerable challenges from the cumulative effects of the persistent strength in the Canadian dollar and Canada’s poor relative productivity performance.

Marlene Ofter

Marlene Ofter

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