BOC's Lane: BOC Decisions To Take Stronger CAD Into Account

By Yali N'Diaye

     OTTAWA (MNI) - Reaffirming that the Bank of Canada remains data dependent,

Deputy Governor Timothy Lane said Thursday the Canadian dollar strengthening

will "pretty strongly" be taken into account.   

     "Each decision is a live decision," Lane said during a question and answer

session following a speech at Saskatoon Regional Economic Development Authority,

in the province of Saskatchewan. "We're kind of watching the numbers as they

come along."

     Among the data, he particularly pointed out the recent strengthening of the

loonie, adding "we're certainly watching that closely and we'll be taking that

into account pretty strongly in making our decisions." 

     Justifying the September 6 decision to hike the overnight rate target to

1.0% from 0.75%, Lane said the data were looking "quite favorable" over the

summer, with the expansion broadening and the resource economy rebounding.

     "Interest rates are still quite low", however, relative to the estimated

neutral level, he said. "That still seems appropriate, partly because we don't

know how the economy is going to react" after a cumulated 50 basis point rate

hike.

     Turning to household debt, Lane repeated it remains a "big vulnerability"

for the financial system and the BOC is "hopeful that over time this will

moderate".

     That being said, as the Canadian economy seems on a better track, this

should help household afford the debt that've taken on and it is "certainly

something we are watching very closely and we'll continue to do so."

     While mortgage costs remain low, Lane warned households should remember

that the current level of interest rates is "really exceptional and it's not a

level that's likely to continue throughout the life of a mortgage."

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com

[TOPICS: M$C$$$]