* Bank of Canada sticks to message rate hike needed in time
* Weak data has pushed back market forecasts for rate hike
* Canadian interest rates are at near-record lows
By Russ Blinch
LONDON, Ontario, Feb 25 The head of the Bank of
Canada reiterated on Monday that the next move in the country's
interest rates is likely to be higher, even as he acknowledged
growth in the last quarter of 2012 might have been softer than
Governor Mark Carney noted that the central bank only last
month said there's ultimately a need for some withdrawal of
monetary policy stimulus, though the prospect was "was less
"Obviously we stand by that assessment," he told reporters
after a speech in London, Ontario.
Some economists last week pushed their forecasts for the
timing of the next Canadian rate hike further into the future
after data showed the economy registered its lowest inflation in
more than three years last month and retail sales sank in
Canadian interest rates are at a near-record low 1 percent.
The Bank of Canada has said since early last year its next move
is likely to be a rate increase, making it the only Group of
Seven central bank with a tightening bias.
The weak data prompted some speculation the central bank
could drop the tightening bias. But Carney's comments seemed to
suggest the bank favors the status quo for now, said Benjamin
Reitzes, a senior economist and foreign exchange strategist at
Bank of Montreal
"He still said that rates will still eventually have to go
higher ... there's no reason to believe they're going to change
things materially at this point," said Reitzes.
The bank last month slashed its fourth-quarter annualized
growth forecast to 1.0 percent from 2.5 percent. But Carney said
on Monday this might now also be too optimistic, citing the
emergence of downside risks the bank had identified.
"I don't want to overemphasize shorter-term data, but there
is a bit of that bias and I would say that, particularly around
the fourth quarter of 2012, we'll find out shortly, but it might
be slightly softer than we had forecast," he said.
Statistics Canada will release figures for fourth quarter
growth this Friday.
Carney said one reason for the likely lower growth was an
unexpectedly weak export sector, which is suffering from what he
called a "competitiveness element."
Exporters are struggling to cope with a strong Canadian
dollar and soft demand, particularly from the United States.