Bank of Canada maintains overnight rate target at 1/4 per cent and reiterates conditional commitment to hold current policy rate until the end of the second quarter of 2010



    OTTAWA, June 4 /CNW Telbec/ - The Bank of Canada today announced that it
is maintaining its target for the overnight rate at 1/4 per cent. The Bank
Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.
    Information received since the Bank's April Monetary Policy Report (MPR)
is broadly consistent with the Bank's medium-term outlook for output and
inflation in Canada. The economy is undergoing major restructuring in a number
of sectors. The already significant output gap will continue to widen through
the third quarter, putting downward pressure on inflation. The Bank continues
to expect that the global and Canadian recoveries will be more muted than
usual.
    In recent weeks, financial conditions and commodity prices have improved
significantly, and consumer and business confidence have recovered modestly.
If the unprecedentedly rapid rise in the Canadian dollar (which reflects a
combination of higher commodity prices and generalized weakness in the U.S.
currency) proves persistent, it could fully offset these positive factors.
    The outlook is subject to considerable uncertainty. While the underlying
macroeconomic risks are roughly balanced, the Bank judges that, as a
consequence of operating at the effective lower bound, the overall risks to
its inflation projection remain tilted slightly to the downside.
    Conditional on the outlook for inflation, the target overnight rate can
be expected to remain at its current level until the end of the second quarter
of 2010 in order to achieve the inflation target.
    The Bank retains considerable flexibility in the conduct of monetary
policy at low interest rates, consistent with the framework outlined in the
April MPR.

    Information note:

    The next scheduled date for announcing the overnight rate target is 21
July 2009. A full update of the Bank's outlook for the economy and inflation,
including risks to the projection, will be published in the MPR on 23 July
2009.




For further information:

For further information: Jeremy Harrison, (613) 782-8782


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