UPDATE 2-Harper backs Bank of Canada rate cut; no fiscal stimulus planned

Thu Jan 22, 2015 4:02pm EST
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(Adds quotes from prime minister, background)

By Andrea Hopkins

ST. CATHARINES, Ontario Jan 22 (Reuters) - Canadian Prime Minister Stephen Harper voiced complete confidence in the Bank of Canada on Thursday, a day after it stunned markets by cutting interest rates amid a plunge in oil prices.

Harper also tried to play down the effects of the slide in crude prices and repeated a promise to balance the budget in 2015/16, an important political move ahead of an election set for October.

Canada is one of the world's major oil producers and the slump in prices, by around 60 percent since June, will knock billions from government revenues.

Harper said the economy did not need stimulus measures and noted the Bank of Canada was still predicting some growth this year.

The central bank cited a threat to economic growth and its inflation targets from the oil price plunge and said it was ready to ease policy further if necessary.

"The government has complete confidence in the Bank of Canada and the actions that it has taken," Harper told reporters in the Ontario city of St. Catharines.

"They are appropriate but in terms of fiscal policy the appropriate action is to make sure that as long as the economy continues to grow, we balance our budget," he said.   Continued...