Bank of Canada's Carney confirms rate cuts to come

Mon Feb 18, 2008 4:21pm EST
 
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OTTAWA (Reuters) - The Bank of Canada will consider strong domestic demand, the impact on prices of the strong currency and the possibility of a more protracted U.S. slowdown and tighter credit conditions when setting interest rates in March, Governor Mark Carney said on Monday.

In the prepared text of his first speech as governor, Carney ruled out any possibility of an unexpected rate cut prior to the bank's next scheduled meeting on March 4. But he left the door open to a rate reduction that might be more aggressive than the quarter-point cuts the bank made to its overnight rate in December and January.

In January, after leaving rates at 4 percent, the bank said more monetary stimulus would likely be required in the near term.

"The timing and degree of that stimulus will be determined at future fixed announcement dates, after we have conducted a thorough analysis of, and applied our judgment to, all information available to us at that time," Carney said in his speech, echoing statements made earlier this month in Tokyo.

Canada's economy has adjusted well to sharp movements in its terms of trade, Carney said, citing increased business investment, wage growth and strong job growth. But he said the bank must be "mindful" not to rely on any one measure of core inflation when evaluating price growth.

(Reporting by Louise Egan; Editing by David Ljunggren)