November 21, 2012 / 5:28 PM / 6 years ago

Bank of Canada keeps "over time" condition on rate hike

OTTAWA (Reuters) - Bank of Canada Deputy Governor Tim Lane repeated on Wednesday the central bank’s message that interest rate increases will likely be needed, but only over time.

A sign framed by maple leaves is pictured in front of the Bank of Canada building in Ottawa July 17, 2012. REUTERS/Chris Wattie

The “over time” phrase was introduced in the bank’s key guidance in its rate statement on October 23 as a way of signaling that while the next rate move is likely to be up, such a move was less imminent than it had been.

“Over time, some gradual withdrawal of monetary policy stimulus will likely be required, consistent with achieving the inflation-control target,” Lane said, according to a prepared presentation he was giving on Wednesday in Moncton, New Brunswick.

Another part of the presentation, which was posted on the central bank’s website, noted: “The Canadian economy continues to operate with a small amount of excess supply.”

The Bank of Canada is alone in the Group of Seven leading industrialized countries in signaling an intention to raise rates despite expectations of modest and unbalanced global growth.

Lane forecast “very robust growth” in emerging markets, stagnation in Europe and significant dampening of U.S. growth due to fiscal consolidation. He said Canada’s real gross domestic product was still expected to grow at a moderate pace.

Reporting by Randall Palmer; Editing by Jeffrey Hodgson; and Peter Galloway

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