Bank of Canada head says rates on hold until data improves

Tue Jan 7, 2014 5:41pm EST
 
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By Louise Egan and Randall Palmer

OTTAWA (Reuters) - The Bank of Canada should keep its key interest rate on hold until economic data persuades it otherwise, central bank chief Stephen Poloz said on Tuesday, adding that he was not worried about calls from some international players to tighten policy.

His comments follow controversial remarks by Canada's finance minister on Sunday suggesting there would be pressure to raise interest rates in 2014.

"For us, minimizing the risks of making a big mistake here is what we're trying to do, and that tells us that we should be holding rates where they are until the data flow changes our mind," Poloz said in an interview with CBC television.

Asked about the potential for higher rates in 2014, Finance Minister Jim Flaherty told CTV television on Sunday there would be some pressure to tighten because of the U.S. Federal Reserve scaling back its bond-purchasing program.

He also cited reports by the Organization for Economic Co-operation and Development and the International Monetary Fund recommending rate increases.

"I think the pressure will be there because the Fed in the U.S. should stop printing money, and taper off as they say ... And the OECD and the IMF have both said to Canada, we ought to let our interest rates go up a bit, so there will be some pressure there for that to happen," Flaherty said.

Flaherty's remarks spurred some criticism that he appeared to be meddling in the day-to-day implementation of monetary policy, which is the domain of the Bank of Canada and supposed to be off limits to the government.

His comments on the outlook also appeared to contradict the central bank chief, who has been signaling rates are on hold for the foreseeable future.   Continued...

 
Canada's Finance Minister Jim Flaherty speaks to journalists before the start of a meeting with provincial and territorial finance ministers at Meech Lake in Chelsea, Quebec December 16, 2013. REUTERS/Chris Wattie