April 30, 2012 / 12:42 PM / 6 years ago

Bank of Canada repeats may need to withdraw stimulus

OTTAWA (Reuters) - Bank of Canada Deputy Governor Timothy Lane said on Monday it may become appropriate to withdraw some of the considerable monetary policy stimulus the central bank is providing, reiterating more hawkish language the BOC introduced this month.

The Bank of Canada building is pictured in Ottawa March 3, 2009. REUTERS/Chris Wattie (CANADA)

“In light of the reduced slack in the economy and firmer underlying inflation, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2 percent inflation target over the medium term,” he said in a speech in Ottawa.

“The timing and degree of any such withdrawal will be weighed carefully against domestic and global economic developments.”

Lane’s comments echo remarks by Bank of Canada Governor Mark Carney, who has spoken about the country’s economic outlook on several occasions this month.

On April 17 the central bank kept rates unchanged, as expected, but signaled that it was starting to think more seriously about tightening monetary policy.

The Bank of Canada has frozen rates at 1 percent since September 2010 after it became the first in the G7 to raise borrowing costs from lows hit during the financial crisis.

Carney has also repeated his warnings about excess household debt as Canadians take out mortgages at extremely low borrowing rates, saying the country should heed the lessons of the U.S. housing crash.

A Reuters survey of the country’s primary dealers, conducted immediately following the Bank of Canada rate announcement, showed the median forecast for the timing of the next rate increase being pushed up to the first quarter of 2013. <CA/POLL>

Reporting by Louise Egan, writing by Jennifer Kwan; Editing by Chizu Nomiyama

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