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Interest rate hikes could happen next year

The Bank of Canada clung on Wednesday to its year-long message that its next move on interest rates would be a hike, staying the course in the final decision under outgoing Governor Mark Carney and leaving any change in stance to his successor.

As expected, the central bank held the key policy rate at 1 percent, extending a nearly three-year freeze on rates, the longest since the 1950s.

It cited continued slack in the economy, a muted outlook for inflation, and slower debt buildup by Canadian households as justification for keeping rates unchanged for now.

The "considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required," it said.

Governor Carney is stepping down and will begin a five-year term as Bank of England governor on July 1.

Canada's central bank is the only one in the Group of Seven industrialized nations to signal that its next move will be a rate increase, while the U.S. Federal Reserve and other central banks continue to pump stimulus into the global economy through massive bond-buying campaigns after slashing rates to zero.

Economists don't expect an increase until the final quarter of 2014, according to a median forecast of 34 analysts in a Reuters poll earlier this month.

Source:
Louise Egan and Randall Palmer, Reuters

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