Report calls on central bank to start hiking interest rates
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Report calls on central bank to start hiking interest rates
GDP expected to rise 2.25% this year: OECD
Read more: http://www.calgaryherald.com/business/Report%20calls%20on%20central%20bank%20to%20start%20hiking%20interest%20rates/6664026/story.html#ixzz1viDrT8E6
New economic projections show the global economy is growing, albeit slowly, lifted by a resurgence in trade and market confidence, but stymied by the euro crisis that has deepened since a temporary easing in late 2011.
Canada, Japan and the United States are growing faster than the euro countries, while emerging markets experience a "moderate cyclical upswing," according to the Economic Outlook published Tuesday by the Organization for Economic Co-operation and Development.
Canada's GDP is expected to grow 2.25 per cent this year and 2.5 per cent in 2013, according to the report, driven by private consumption and investment.
"It's not a great outcome. A generation ago, coming out of a recession like this, we would have thought this was deplorable, but it's not bad," said Peter Jarrett, a senior economist with Paris-based OECD.
Canada's growth will outpace the OECD index of 34 countries, which is expected to be 1.6 per cent in 2012 and 2.2 per cent in 2013.
Meanwhile, OECD stressed the crisis in the eurozone remains the most severe risk facing the global outlook.
Although unemployment rates in Canada and the United States have recently trended downward, the euro area's jobless rate has risen since 2011 and is expected to hover around 11 per cent through 2013. Further, market confidence is rising in the U.S. but falling in Europe.
Heading into an EU summit in Brussels this week, the OECD urged leaders to take immediate action to avoid a deepening of the euro crisis and spillover effects. It called for balanced fiscal consolidation paced according to sovereign needs.
Assuming the eurozone "muddles through" its crisis, avoiding a Greek exit, Jarrett said OECD thinks the Bank of Canada needs to start raising interest rates in the fall to avoid speedy inflation that will follow economic growth.
"In order to head off that eventuality, we assume that beginning in the fourth quarter the bank would move at a rate of a quarter of a point per quarter, bringing us to a rate of about 2.25 per cent by end of 2013," Jarrett said.
The OECD report flagged Canada's housing sector as imbalanced and noted a rate hike is also needed to slow down housing prices.
Canada, Japan and the United States are growing faster than the euro countries, while emerging markets experience a "moderate cyclical upswing," according to the Economic Outlook published Tuesday by the Organization for Economic Co-operation and Development.
Canada's GDP is expected to grow 2.25 per cent this year and 2.5 per cent in 2013, according to the report, driven by private consumption and investment.
"It's not a great outcome. A generation ago, coming out of a recession like this, we would have thought this was deplorable, but it's not bad," said Peter Jarrett, a senior economist with Paris-based OECD.
Canada's growth will outpace the OECD index of 34 countries, which is expected to be 1.6 per cent in 2012 and 2.2 per cent in 2013.
Meanwhile, OECD stressed the crisis in the eurozone remains the most severe risk facing the global outlook.
Although unemployment rates in Canada and the United States have recently trended downward, the euro area's jobless rate has risen since 2011 and is expected to hover around 11 per cent through 2013. Further, market confidence is rising in the U.S. but falling in Europe.
Heading into an EU summit in Brussels this week, the OECD urged leaders to take immediate action to avoid a deepening of the euro crisis and spillover effects. It called for balanced fiscal consolidation paced according to sovereign needs.
Assuming the eurozone "muddles through" its crisis, avoiding a Greek exit, Jarrett said OECD thinks the Bank of Canada needs to start raising interest rates in the fall to avoid speedy inflation that will follow economic growth.
"In order to head off that eventuality, we assume that beginning in the fourth quarter the bank would move at a rate of a quarter of a point per quarter, bringing us to a rate of about 2.25 per cent by end of 2013," Jarrett said.
The OECD report flagged Canada's housing sector as imbalanced and noted a rate hike is also needed to slow down housing prices.
© The Financial Post