NANAIMO, British Columbia (Reuters) - The Bank of Canada will take whatever action is necessary to keep inflation on target, and its economic forecasts next week will reflect the fallout from extreme global uncertainty, central bank chief Mark Carney said on Monday.
Carney also said there were some signs the country's once hot housing market was easing, but warned that the data could be volatile as the effect of fiscal and regulatory changes designed to curb the mortgage market took effect.
Since April, Carney - alone among his Group of Seven peers - has regularly talked about the possible need to raise interest rates from near-record lows as the economy recovers, even as data showed Canada was being hurt by challenges in Europe and the United States.
His speech on Monday omitted the hawkish language, although it was not clear Carney was abandoning the monetary tightening bias altogether.
"The bank will take whatever action is appropriate to achieve the 2 percent CPI (consumer price index) inflation target over the medium term," Carney said.
As recently as October 4, senior deputy governor Tiff Macklem repeated the bank's line that some withdrawal of the "considerable monetary policy stimulus" might become appropriate.
Carney also highlighted the bank's possible role in leaning against asset bubbles, naming Canada's high household debt as an example. This suggests a willingness to hike rates if the debt were deemed beyond the scope of fiscal and regulatory measures.
Carney later said in a press conference that he was naming an example of the various ways the bank could act.
"The point was a hypothetical one to ensure that people properly understand our overall monetary policy framework," he said. "Action has been taken. We've always said that monetary policy is the last line of defense."
Peter Buchanan, economist at CIBC World Markets, said the comments showed Carney was "not yet prepared to get off the fence and attack the problem by raising rates, given low inflation and potential risks to the recovery."
Soaring personal debt has been a top concern of Carney, and data on Monday showed the ratio of household debt to income continues to rise.
The debt problem has been partly fueled by people taking advantage of ultra-low mortgage rates and rising home prices. Those pressures may be easing, Carney said.
"We're seeing some signs of that and there is some desirability obviously ... to an easing there, but we continue to watch the situation along with others very closely," he said.
Analysts surveyed by Reuters unanimously expect the central bank to hold its overnight lending target unchanged at 1.0 percent on October 23, and predicted it would resume hiking rates in the second half of next year.
The bank's quarterly monetary policy report is due out on October 24 and will revise the bank's domestic and global economic projections.
Additional reporting and writing by Louise Egan and David Ljunggren; Editing by Leslie Adler