TORONTO Below are some key quotes from a news conference by the Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers on Wednesday after the central bank held key interest rate at 5%.

MACKLEM ON MIDDLE EAST CONFLICT, ENERGY PRICES

"I'm no military expert, but it's clear there are risks that tension in the Middle East could escalate and you could see an even bigger increase in prices."

"Inflation has been above the target for two years, inflation expectations, near term inflation expectations are still above the target ... against that environment, we would need to be more cautious than normal about seeing through it (in higher energy prices) and what we'd be particularly focused on is the impacts on core inflation."

"If we saw evidence that higher energy prices were passing through to broader prices because of higher transportation costs, for example, that would be a signal that that increase in oil prices is starting to feed through to the rest of the economy and that would really be something of concern to us."

MACKLEM ON MOVEMENT IN THE CANADIAN DOLLAR

"What is a bit unusual through this tightening cycle that we've been through is that normally when we raise interest rates a lot that causes the exchange rate to appreciate. That helps slow foreign demand for Canadian products. And it also has a direct effect - it reduces inflation in import prices. So because we've been moving rates up in a roughly similar fashion to other central banks, particularly the Fed, what you've seen is that the Canadian dollar has been reasonably stable - down a little bit against the U.S. dollar, up against most other currencies."

MACKLEM ON IMPORT INFLATION

"Because the U.S. is raising rates a lot, that is restraining demand for Canadian exports. So we are getting that part of the effect. What we're not getting is, we're not getting the direct affect of an appreciation (of the Canadian dollar) to lower import inflation."

MACKLEM ON RELYING ON INTEREST RATE HIKES RATHER THAN CURRENCY APPRECIATION TO TACKLE INFLATION

"So that does mean, everything else equal, we've got to rely more on interest rates (than appreciation of the Canadian dollar). So that is something we've had to take into account."

(Reporting by Fergal Smith, Ismail Shakil; Compiled by Denny Thomas)