Rates to rise before 2014-end, Carney suggests
Benchmark at 1% for more than two years
Bank of Canada governor Mark Carney is suggesting interest rates will rise before the end of 2014.
It’s one of the clearest indications Carney has given as to when he might raise the bank’s key benchmark, which has been held at one per cent for more than two years.
Carney made the comments to the Commons finance committee, where he said government restraint is putting a speed limit on the economy, but not as much as some suppose.
The central banker says his estimate is that the public sector will contribute 0.3 percentage points to economic growth in 2013.
That projection, he says, takes into account raising the policy rate “over the course of the projections ... which runs until the end of 2014.”
Most private sector econo- mists don’t believe Carney will take any action on rates until late 2013 or early 2014.
The 0.3 percentage point figure is about half the normal contribution of government, but still does not constitute a drag on the expansion.
The public sector did apply a slight brake this year, how- ever, subtracting 0.2 points from the expected 2.2 per cent advance.
Carney says the biggest factor holding back Canada’s economy is foreign headwinds, particularly slower growth in emerging markets, the recession in Europe and weak demand in the United States.