Thursday, April 06, 2006

Bank of Canada Sees Rate Hikes

The Bank of Canada sounded a muted warning about robust growth, job shortages and capacity constraints on Thursday, pointing to further hikes in domestic interest rates before its latest crackdown ends.

The central bank nudged growth forecasts slightly higher for 2006 and slightly lower for 2007, and said a plan from Canada's incoming Conservative government to cut sales tax levels would lower inflation by 0.6 percentage points.

Analysts said the report pointed to two more interest rate hikes before a tightening cycle that began in September ends.

Tuesday's rate hike brought Canada's overnight rate to 3.50 percent, from 2.50 percent in September. Comparable U.S. rates are at 4.25 percent.

Analysts said the central bank likely wants to blur expectations about the economy until the new Conservative government defines its policies.


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