UPDATE 2-Canada PM says weak C$, oil hurt large parts of the economy

Mon Jan 18, 2016 6:55pm EST
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(Adds comment by senior Canadian government official)

By David Ljunggren

SAINT ANDREWS, New Brunswick Jan 18 (Reuters) - Canadian Prime Minister Justin Trudeau on Monday struck a more downbeat note than typical on the weak Canadian dollar as well as low oil prices, saying they hurt large parts of the economy.

Trudeau, pressed about the currency's new 12-year low against the U.S. greenback on Monday, told reporters at a cabinet retreat in Atlantic Canada: "Obviously the dollar and falling oil prices have a negative impact on parts of our economy, on broad swathes of our economy in many cases."

The Canadian dollar's speedy plunge to a 12-year low has fueled calls from some market and industry players for the country's central bank to hold interest rates steady, even as traders increase bets on a cut this week.

The Bank of Canada is due to announce its latest interest rate announcement on Wednesday.

BMO Capital Markets chief economist Doug Porter said Trudeau's comments "certainly thicken the plot" for the rate decision.

"The inclusion of the currency in (his) sentence is notable - obviously there is now official concern in Ottawa about the seeming one-way move in the Canadian dollar," he said in a note to clients.

A senior government official, asked later about Trudeau's comment, said the weak dollar brought both challenges and opportunities - a phrase the prime minister usually employs when asked about the currency.   Continued...