OTTAWA (Reuters) - Canada's economy is doing better than expected and the threat from the European debt crisis has lessened, Bank of Canada Governor Mark Carney said on Monday while warning that high household debt levels were unsustainable.
"Conditions in the Canadian economy have...been somewhat stronger and the degree of slack somewhat smaller than the bank had expected," the central bank chief said in a speech to a business audience in Kitchener-Waterloo, Ontario.
He said the bank's monetary policy decisions would take into account the stronger growth profile, firmer-than-expected inflation, fiscal restraint recently announced by the federal and provincial governments as well as households' dependence on debt financing, which he said remained the biggest domestic risk.
"As always, this analysis will inform our monetary policy decisions. The bank will take whatever action is appropriate to achieve the 2 percent CPI inflation target over the medium term," he said.
The bank's next interest rate decision is April 17. It is widely expected to keep its key rate on hold at 1.0 percent until well into 2013.
Carney's speech focused on the need to rethink the country's export strategy in light of chronically weak growth expectations for its main U.S. market and the limitations of relying on domestic spending to fuel economic growth.
Reporting by Louise Egan; editing by Randall Palmer