UPDATE 2-Bank of Canada sees rates on hold 'quite some time'

Thu Dec 12, 2013 4:16pm EST
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* Poloz dampens talk of possible interest rate cut

* Says central bank has expressed neutrality on next move

* BoC balancing low inflation with financial system risk

* Says up to market to set C$ level

By Louise Egan

MONTREAL, Dec 12 (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.   Continued...