* Warns that interest rates will rise one day
* Does not repeat BoC language on eventual rate hikes
* Says Bank of Canada has role in nurturing economy
* First public remarks since taking over on Monday
By Louise Egan and Randall Palmer
OTTAWA, June 6 The new governor of the Bank of
Canada said on Thursday that interest rates will rise one day,
but he stopped short of repeating his predecessor's explicit
guidance on the likely need for rate hikes, rather than cuts, in
In his first public appearance since taking the reins at the
central bank on Monday, Stephen Poloz said he sees no immediate
risk from current rock-bottom interest rates, although he did
not want loose monetary policy to last for too long.
Many analysts had expected Poloz to be more dovish than
previous Bank of Canada Governor Mark Carney, who stepped down
last month after a year beaming out a clear message that the
bank's next move would be a rate increase.
The message from Poloz could be interpreted either way, the
"Low (rates) for hopefully not too long gives you the
outcomes you need to get through this crisis and then as the
world unfolds we get back to normal, and that's our outlook,"
Poloz told the House of Commons Finance Committee.
"We don't see evidence that those risks (of low interest
rates) are manifesting themselves in a threatening way at this
stage, but they'll be carefully monitored, and that trade-off
continues to be made as we go along."
Not yet accustomed to Poloz' folksy speaking style, some
economists concluded he was holding the line on monetary policy
while others detected a slightly more dovish tone.
"Overall, I don't think we're going to see a big change in
stance from the Bank of Canada come July," said Krishen
Rangasamy, senior economist at National Bank Financial.
Poloz, who previously headed Canada's export credit agency,
has a first speech as governor on June 19 and his first rate
decision in mid-July, both events where he may be able to put a
clearer stamp on any policy priorities.
He said on Thursday that the central bank needed to
"nurture" the economy through a phase he likened to postwar
reconstruction and emphasized that inflation below the bank's 2
percent target - it is currently at 0.4 percent - is just as
much a concern as above-target inflation.
That provided fodder for those who think he'll back away
from any rate-hike talk.
"A speech that is all about 'nurturing' and the BoC's role
in building confidence throughout this process suggest a policy
leaning toward at least a less hawkish BoC than under the last
months of Carney's tenure," Scotiabank economists Derek Holt and
Dov Zigler said in a note to clients.
Carney was the first central banker in the Group of Seven
industrialized nations to raise rates after the global financial
crisis, with three rate hikes in 2010. But the bank has held its
main policy rate at 1 percent since then, the longest period of
unchanged interest rates since the 1950s.
In April 2012, the bank again began signaling intentions to
tighten monetary policy, and that bias remains in place,
although some argue it has been so watered down in recent months
that it has become almost meaningless.
Analysts in a Reuters poll published on May 23 predicted, on
average, that the next interest rate increase will come in the
fourth quarter of 2014.
Poloz sounded upbeat about the prospects for further growth
in Canada and for the recovery in the U.S. housing market.
The Bank of Canada has long predicted that growth in Canada
will be driven more by exports than by domestic demand, which
fueled the quick recovery from recession.
Poloz said he first expected foreign demand to recover,
followed by stronger export performance, improved confidence and
then business expansion.
"This sequence may already be underway," he said.
"We are now seeing signs of recovery in some important
external markets, notably the United States and Japan, and there
is continued growth in emerging-market economies."