Saturday, April 08, 2006

Banks Project the Bank of Canada will Raise its Key Interest Rate

Both BMO and TD Bank project the Bank of Canada will raise its key interest rate by another half percentage point to four per cent over the next number of months.

That move would lead to higher mortgage and borrowing rates and will slow interest-sensitive areas of the economy, like some parts of durable spending on the consumer side as well as the housing market.

Growth is expected to continue to be solid next year, at about three per cent, again led by business and consumer spending.

The risks will continue to be high energy costs and the potential of a slowdown in the U.S. economy, which could happen in the latter half of this year.

Growth, however, won't be equal across Canada since the rising Canadian dollar continues to depress central Canadian manufacturers but boosts spending on imports while record energy prices aids western Canadian oil and gas companies.


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