OTTAWA, Oct 30 (Reuters) - Bank of Canada Governor Mark Carney told legislators on Tuesday that he may need to raise interest rates over time, repeating in prepared remarks that the bank remained hawkish, although slightly less so than in previous months.
Canada’s central bank is the only one among the major, industrialized economies to talk about rate hikes, citing modest but steady economic growth, robust domestic spending and high personal debt levels.
“Over time, some modest withdrawal of monetary policy stimulus will likely be required, consistent with achieving the 2 per cent inflation target,” Carney said in his opening statement to a parliamentary finance committee.
The line repeated that from the central bank’s written statement on Oct. 23 when it held its benchmark overnight rate at 1.0 percent, where it has been for over two years.
The bank had intended to signal that eventual rate hikes would be later than it had previously suggested. But a nuanced change in wording was lost on many financial market players who believed the bank to be just as hawkish as ever. [ID: nL1E8LO790]
The confusion forced Carney to declare bluntly two days later that rate hikes were “less imminent.” He did not include that clarification in his prepared text on Tuesday.
The bank is expected to begin raising rates in the fourth quarter of 2013, according to the median forecast of Canada’s primary securities dealers surveyed after the bank’s rate announcement and Carney’s comments last week.