OECD Optimistic About Canada Says Rate Hike More Likely

Economic data in Canada can be far from predictable.
Exports were expected to gain traction this year, which appeared to be happening in February — only to see the country’s trade surplus shrink a month later. Likewise, the labour market continues to fluctuate and frustrate, reflecting uneasiness with the growth pattern of the economy itself.

Still, the Organization for Economic Cooperation and Development is more optimistic about Canada’s near-term performance than many of our own policymakers and private-sector analysts.

The Paris-based group, as part of its global update of forecasts on Tuesday, said Canada’s gross domestic product would grow 2.5% this year — after 2% in 2013 — and advance 2.7% in 2015. That’s rosier than the Bank of Canada’s outlook, which was downgraded last month to 2.3% from 2.5% for 2014 but remains at 2.5% for 2015 — with central bank governor Stephen Poloz acknowledging he is maintaining a neutral stance on the next direction of interest rate movements until growth solidifies and inflation gets back on course.

But the OECD said with data looking more likely to strengthen, the bank should be planning to raise its benchmark rate — at 1% since September 2010 —rather than cutting borrowing costs.

via Financial Post

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