WATERLOO - The Bank of Canada needs to consider the effect of an interest rate move by the U.S. Federal Reserve on exchanges rates and market rates, but does not need to keep pace with U.S. policy, a top official at the Bank of Canada said on Wednesday.

In a speech on capital flows, Deputy Governor Timothy Lane speculated on the impact on Canada of a hypothetical rate hike by the Fed, saying there would be a tightening effect via higher market interest rates, and a stimulative effect as a weaker Canadian dollar boosts export competitiveness.

"It is important to note that the economic setting for such an interest rate move also needs to be taken into account: the Fed's rate move would likely be made in response to a strengthening U.S. economy, which is itself typically favorable for our exports," Lane said in prepared remarks to the Centre for International Governance Innovation in Waterloo, Ontario.

"We could directly observe the effects on interest rates and exchange rates prior to making a policy decision. And certainly, we would not consider the implication of such a move by the Fed in any mechanical way," Lane added.

He said the bank's track record of delivering low and stable inflation amid shocks gives it credibility to pursue independent policy amid globalized capital flows.