MNI POLICY: Lane: BOC `Charting Our Own Course' Amid Fed Cuts>

By Greg Quinn

     OTTAWA (MNI) - Bank of Canada Deputy Governor Tim Lane said there 

is "no reason" to follow Fed rate cuts because domestic spending has 

held strong amid global trade wars. 

     The economy is close to full capacity and inflation will 

temporarily move above the BOC's 2% target next year on gasoline prices, 

Lane said Thursday. Business investment has been surprisingly strong and 

wage gains are helping consumer spending, signs growth will pick up 

again after being slowed by a drop in exports in the third quarter. 

     The speech "Charting Our Own Course" defended keeping one of the 

world's highest policy rates as the Fed cut three times while Japan and 

Europe dive further into extraordinary stimulus. Canada's dollar surged 

Wednesday as the BOC held its 1.75% rate citing signs the global economy 

is stabilizing, leading investors to cancel some bets Canada would join 

the rate-cut cycle next year. 

     "There is no reason for the Bank of Canada to move in step with the 

Fed," Lane said in the text of a speech he's giving in Ottawa. "The tone 

of developments in recent weeks gives us more confidence in the outlook 

for growth and inflation." 

     Future actions will consider trade risks and "sources of 

resilience" in domestic spending, he said. Damage to exports and 

business spending remains the biggest risk to the outlook, but that must 

be weighed against strains in household finances through a housing boom 

that is showing signs of life again.  

     Recent news on trade has been "mixed" and uncertainty will persist 

even if the U.S. and China come to an agreement, Lane said. "Although a 

global recession is not in our baseline forecast, questions remain about 

whether market pricing fully reflects the risks inherent in the current 

global situation," he said. 

     "Canada also has notable strengths, and inflation remains on 

target," Lane said. "It is because of this strength amid the turmoil 

that we say Canada is resilient, although it is not immune. This 

resilience has helped the Bank of Canada chart its own course in 

monetary policy."

--MNI Ottawa Bureau, +1-613-314-9647, greg.quinn@marketnews.com

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