October 25, 2012 / 4:53 AM / 8 years ago

Bank of Canada's Carney says rate hikes will be gradual

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

OTTAWA (Reuters) - The Bank of Canada will take care not to raise interest rates too rapidly when the time comes because of risks to the economy from challenges in the United States and Europe, Governor Mark Carney said in an interview released on Thursday.

Carney said on Wednesday that the need to hike rates in Canada was “less imminent,” but stuck to his message that the next move would be up, not down, in contrast to the U.S. Federal Reserve and other major central banks.

The Canadian economy has fully recovered from the 2008-09 recession and is expected to grow at a little more than 2 percent through to 2014, justifying an eventual rate hike, but global headwinds remain a threat to the trade-dependent country.

“There’s no question that what we will do, taking all these factors together, is manage policy so that interest rates rise at an appropriate pace,” Carney told Sun News Network in an interview to be broadcast Thursday at 6 p.m. (2200 GMT).

He said the bank would also try to avoid creating a shock for the 10 percent of Canadian households who are vulnerable to a sudden change in borrowing costs because of their excessive debt load.

“It’s not in our interest to do anything too abruptly either on the upside or the downside,” he said. “We’re well aware of the risks on that side of things.”

The bank is expected to hold its benchmark overnight rate at 1.0 percent until the fourth quarter of 2013, according to the median forecast in a Reuters poll of Canada’s primary securities dealers conducted on Wednesday.

Reporting by Louise Egan; Editing by Lisa Shumaker

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