UPDATE 3-Bank of Canada surprises with more rate-hike talk

Tue Oct 23, 2012 1:31pm EDT
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* BoC softens hawkish language slightly

* Timing of rate hike now less definite

* Bank says will consider household debt in setting policy

* Inflation, growth outlook slightly more downbeat

By Louise Egan and Randall Palmer

OTTAWA, Oct 23 (Reuters) - The Bank of Canada surprised markets on Tuesday by leaning towards higher interest rates and issuing a fairly upbeat outlook on growth, adding for the first time that soaring household debt could justify eventual rate increases.

The central bank, which has held its key rate at 1.0 percent for two years, continued to use the hawkish language adopted in April that has made it an outlier among the central banks of major economies.

It softened its tone only slightly by making the timetable for rate hikes less definite.   Continued...