UPDATE 2-Bank of Canada head says rates on hold until data improves

Tue Jan 7, 2014 5:40pm EST
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* Poloz remarks follow finance minister's controversial comments

* Sees policy rate on hold, dependent on data flow

* Says long-term market rates may come under upward pressure due to Fed tapering

By Louise Egan and Randall Palmer

OTTAWA, Jan 7 (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.   Continued...