UPDATE 4-Bank of Canada leaves door open to rate cut; C$ sinks

Wed Jan 22, 2014 6:34pm EST
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* BoC says risk of low inflation has become more severe

* Says direction of next rate move depends on data

* Door "slightly more open to a rate cut", Poloz tells BNN

* BoC says C$ strong but that depreciation will help exports

By Randall Palmer and Louise Egan

OTTAWA, Jan 22 (Reuters) - The Bank of Canada said on Wednesday it has become more concerned about weak inflation, and that a "strong" currency is still hampering the country's exports, dovish language that helped send the Canadian dollar to a four-year low.

The central bank also kept its key interest rate on hold at 1.0 percent, as expected, but explicitly stated that its next rate move could be either down or up, depending on economic data.

"We are more concerned about low inflation today than we were three months ago," Governor Stephen Poloz told a news conference. "There's a lot of risk in that analysis. That balance of risk has tilted just a little to the downside, within a zone we would call the neutral zone."

Analysts said the bank was about as dovish as it could be without explicitly saying it was likely to cut rates. They said remarks in its Monetary Policy Report on how the Canadian dollar was still strong, and that its strength still posed an obstacle to exports, was a green light for dollar bears.   Continued...