Dave Dodge, governor of the Bank of Canada, spoke again of the need for higher interest rates on Monday, but offered no details on when those hikes may come.
In a speech before the Calgary Chamber of Commerce, Dodge said the central bank remains concerned about the risk to the Canadian economy of weakness abroad and the threat of war in the Middle East.
However, the economy remains strong, raising the odds that inflationary pressures will have to be countered with higher interest rates at some point.
"The pace of this action will continue to depend on the balance of domestic and external developments and on their implications for pressures on . . . inflation in Canada," he said.
His comments are the first since the U.S. Federal Reserve decided earlier this month to cut rates by half a percentage point to kick start a tepid economic recovery south of the border.
It was the first move by the Fed on interest rates this year after 11 cuts last year. Canada, meanwhile, has raised rates three times this year for a total gain of 0.75 per cent as the domestic economy charges ahead.
Canada's key rate sits at 2.75 per cent, while the U.S. rate is 1.25 per cent.
Dodge made no direct reference to the U.S. cut.
He reaffirmed the BoC's prediction that Canada's economy will grow a solid about three per cent between now and the middle of 2003. That's a bit short of estimates made earlier in the year and takes into account the impact of sluggishness in the U.S.
"Assuming that the financial headwinds and geopolitical concerns dissipate in the second half of next year, we should see a strengthening of domestic and foreign demand and the resumption of above-potential growth for Canada," he said.
Higher interest rates will be needed to keep inflation in check at that point.
"As we go forward, we will need to remove some of the monetary stimulus now in place before the economy reaches it level of full potential," he said.
The bank's next decision on interest rates comes Dec. 3. Most analysts expect the bank to hold steady until after the New Year.
In a speech before the Calgary Chamber of Commerce, Dodge said the central bank remains concerned about the risk to the Canadian economy of weakness abroad and the threat of war in the Middle East.
However, the economy remains strong, raising the odds that inflationary pressures will have to be countered with higher interest rates at some point.
"The pace of this action will continue to depend on the balance of domestic and external developments and on their implications for pressures on . . . inflation in Canada," he said.
His comments are the first since the U.S. Federal Reserve decided earlier this month to cut rates by half a percentage point to kick start a tepid economic recovery south of the border.
It was the first move by the Fed on interest rates this year after 11 cuts last year. Canada, meanwhile, has raised rates three times this year for a total gain of 0.75 per cent as the domestic economy charges ahead.
Canada's key rate sits at 2.75 per cent, while the U.S. rate is 1.25 per cent.
Dodge made no direct reference to the U.S. cut.
He reaffirmed the BoC's prediction that Canada's economy will grow a solid about three per cent between now and the middle of 2003. That's a bit short of estimates made earlier in the year and takes into account the impact of sluggishness in the U.S.
"Assuming that the financial headwinds and geopolitical concerns dissipate in the second half of next year, we should see a strengthening of domestic and foreign demand and the resumption of above-potential growth for Canada," he said.
Higher interest rates will be needed to keep inflation in check at that point.
"As we go forward, we will need to remove some of the monetary stimulus now in place before the economy reaches it level of full potential," he said.
The bank's next decision on interest rates comes Dec. 3. Most analysts expect the bank to hold steady until after the New Year.
