Bank of Canada's Carney says not surprised by weak data

Thu Nov 8, 2012 4:01pm EST
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By Leila Lemghalef

MONTREAL (Reuters) - Recent weak economic data in Canada was expected and does not necessarily mean the central bank will change its view that eventual interest rate hikes are needed, Bank of Canada Governor Mark Carney said on Thursday.

Canada recovered more quickly from the global recession than the United States or Europe, prompting the central bank to hint that it may have to raise interest rates.

But the expansion appears to be slowing. The economy shrank in August for the first time in six months, housing starts slowed in September, the job market stalled in October and exports remain sluggish.

"We have a relatively weak forecast for the third quarter - 1 percent - and data is broadly in line with that," Carney told reporters in Montreal after giving a speech there.

"There are some timing issues that drive some of the output in the energy sector, which will shift some growth between the third and the fourth quarter ... But I wouldn't over-interpret recent data and I certainly wouldn't draw any connection to our monetary stance," he said.

The central bank has held its key interest rate at 1.0 percent for over two years. In April it defied the global trend and began signaling its next move would be a rate hike rather than a cut. Last month Carney upheld the rate-hike talk but said such a move was "less imminent.

In October the bank cut its forecast for third-quarter growth to 1 percent from 2 percent annualized, citing temporary shutdowns in the oil sector. But it predicted growth would speed up to at least 2.5 percent in every other quarter through the end of next year.

Carney remained cautious in his outlook for the once-booming housing market despite a report on Thursday showing housing starts fell more sharply than expected in October.   Continued...