UPDATE 4-Weak growth, inflation delays Bank of Canada rate rise

Wed Jan 23, 2013 4:02pm EST
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* Timing of rate rise "less imminent than anticipated"

* Inflation at bottom of target range in near term

* Full economic capacity up to a year later than thought

* Housing market cooling but some over-building persists

* Canadian dollar drops after bank statement

By Randall Palmer and Louise Egan

OTTAWA, Jan 23 (Reuters) - The Bank of Canada held its benchmark interest rate at 1 percent on Wednesday, but it revised its guidance dramatically to say that excess capacity in the economy, soft inflation and stabilizing household debt have combined to push any rate increase further away than previously thought.

Governor Mark Carney has been the most hawkish central banker in the Group of Seven (G7) major industrial economies for several months, but he has steadily been watering down his guidance on the need to start raising rates.

"While some modest withdrawal of monetary policy stimulus will likely be required over time, consistent with achieving the 2 percent inflation target, the more muted inflation outlook and the beginnings of a more constructive evolution of imbalances in the household sector suggest that the timing of any such withdrawal is less imminent than previously anticipated," the bank said.   Continued...