BOC: Maintains 1.0% Rate, Remains Cautious Re Rate Hikes>

--Meets No-Change Expectations, Present Stance 'Appropriate'

By Courtney Tower

     OTTAWA (MNI) - The Bank of Canada Wednesday maintained its 1.0% 

policy rate, as expected, and maintained as well its stand that it will 

continue to be cautious about any future interest rate hikes. 

     Despite listing a long litany of strong economic indicators in a 

brief statement accompanying the rate decision, the Bank said the 

current policy stance "remains appropriate." 

     Higher interest rates "will likely be required over time" but the 

BOC will continue its stance of being "cautious" about the timing of any 

hikes, it said. 

     The BOC would continue to be data-dependent in assessing four key  

indicators - "the economy's sensitivity to interest rates, the evolution 

of economic capacity, and the dynamics of both wage growth and 

inflation." 

     Financial analysts surveyed by MNI had expected there would be no 

change in the target for the overnight rate, which was raised in July 

and September in 25 basis point stages from the 0.50% that had been in 

place for seven years. 

     The statement said that "despite rising employment and 

participation rates, other indicators point to ongoing - albeit 

diminishing - slack in the labour market." 

     It also noted upward revisions to past quarterly national accounts 

had boosted GDP growth levels, but said: "This is unlikely to have 

significant implications for the output gap because the revisions also 

imply a higher level of potential output." 

     That output gap has been diminishing, the Bank noted in saying that 

"measures of core inflation have edged up in recent months, reflecting 

the continued absorption of economic slack." 

     Among the litany of positive measures of the economy, the BOC noted  

the "very strong" employment growth and that "wages have shown some 

improvement, supporting robust consumer spending in the third quarter." 

     The Bank saw rising positive signs in business investment and in 

evidences of public infrastructure spending. Exports had declined over 

four consecutive months "by more than was expected," but trade data 

Tuesday support the BOC's earlier  projection of export growth resuming 

"as foreign demand strengthens." 

     Foreign demand for Canada is particularly demand from the United 

States, and here the BOC said third quarter strength was stronger than 

had been anticipated but was "still expected to moderate in the months 

ahead." 

     Growth had "firmed" in other advanced economies, oil prices had 

moved higher, financial conditions had eased. On the other hand, the 

global outlook remains considerably uncertain, "notably about 

geopolitical developments and trade policies." 

     Inflation in Canadawas slightly higher than the BOC had anticipated 

and would "continue to be boosted in the short term by temporary 

factors, particularly gasoline prices." 

     The outlook for inflation, to rise to the target 2.0% over coming 

quarters, remains intact. Based on that outlook and on risks and 

uncertainties already defined, the BOC said, "the current stance of 

monetary policy remains appropriate." 

     The next fixed date for announcing the overnight rate target is 

January 17, 2018 when the Bank will also publish a quarterly update of 

the Bank's assessment of the economy and of inflation. 

     ** OTTAWA - MNI **

[TOPICS: M$C$$$,MACDS$]