Bank of Canada pushes rate hikes off, cites weak thid-quarter

Wed Oct 24, 2012 2:51pm EDT
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By Louise Egan and Randall Palmer

OTTAWA (Reuters) - Canadian interest rate hikes have become "less imminent" as the economy slows, Bank of Canada Governor Mark Carney said on Wednesday in unusually explicit comments likely aimed at clearing up confusion over the central bank's recent statements.

The bank has been signaling since April that it will eventually raise its overnight rate from the current 1.0 percent, making it the only central bank among major industrialized economies to lean toward a rate hike.

But a speech by Carney last week, ironically about greater monetary policy transparency, was widely seen as less hawkish than before, and a majority of analysts in a Reuters poll had predicted the bank would soften its language on rates.

The bank did soften its tone on Tuesday, but not by as much as the market had expected, and some concluded that it was perhaps even more hawkish than before.

Carney set things straight in a news conference on Wednesday.

"The case for adjustment of interest rates has become less imminent," he said bluntly.

"But it is important to recognize ... that over time rates are more likely to go up than not," he added.

The Canadian dollar weakened and bond yields eased.   Continued...

Bank of Canada Governor Mark Carney arrives at a news conference upon the release of the Monetary Policy Report in Ottawa October 24, 2012. REUTERS/Chris Wattie