Economists say interest rates will rise, but many also question wisdom of move

Article found at http://www.winnipegfreepress.com/business/breakingnews/economists-say-interest-rates-will-rise-but-many-also-question-wisdom-of-move-102355064.html

OTTAWA – Interest rates are expected to rise for the third time in as many months on Wednesday.

A consensus of economists believe Bank of Canada governor Mark Carney will overlook recent disappointing economic data and continued U.S. weakness and hike the trendsetting rate a quarter point to one per cent.

But the answer is somewhat different when economists are asked if Carney should move.

The reasoning for hiking rates is that while Canada’s economy has noticeably slowed, there is still plenty of evidence suggesting the country no longer needs emergency rates.

But many economists also question how much further Carney can go in his current tightening phase considering that the U.S. is heading in the opposite direction.

And some believe Carney has already moved too quickly, blaming the sharp slowdown in economic activity during the spring and summer to the anticipation of higher interest rates.

Last week, Statistics Canada reported that the country’s gross domestic product rose two per cent in the second quarter, a far cry from the previous quarter’s 5.8 per cent advance.

The slowdown was most acute in the two areas that are most sensitive to interest rates, home and car sales, notes economist Carl Weinberg of High Frequency Economics.