Bank of Canada sees rates on hold 'quite some time'

Thu Dec 12, 2013 4:17pm EST
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By Louise Egan

MONTREAL (Reuters) - The Bank of Canada is likely to keep interest rates on hold "for quite some time," Governor Stephen Poloz said on Thursday, dampening talk that it was edging closer to cutting rates in order to combat low inflation.

In a speech in Montreal, he said the central bank was more worried about downside risks to inflation than upside ones since inflation is well below a 2 percent target, but he stopped short of hinting at any easing.

Asked at a news conference afterwards whether it was accurate that the bank was getting ready to cut, he said: "We don't know. We've expressed our neutrality on that question, which is to say that we're even-handed on the two sides of it at this stage, given what we know today."

He said the bank's move in October and again this month to stop referring to future rate hikes, following 18 months of more hawkish language, was a shift to honesty rather than dovishness.

"All we're really doing is being honest that at this stage we think that interest rates will stay where they are for quite some time, so issuing a warning they're almost ready to go up is not the right timing for this," he said.

"Of course, we believe it will happen as the story unfolds but the destination seems far enough away that we can address that as we get closer," he said.

CIBC World Markets economist Emanuella Enenajor said the appearance was "potentially disappointing for those who may have been looking for Poloz to sound more dovish or talk down the currency."

The Canadian dollar and interest rate futures were little changed following the speech and press conference.   Continued...

Bank of Canada Governor Stephen Poloz takes part in a news conference upon the release of the Monetary Policy Report in Ottawa October 23, 2013. REUTERS/Chris Wattie