Bank of Canada May Tighten in Late 2014, OECD Says

The Bank of Canada will probably begin raising interest rates in the second half of 2014 to contain inflation as the job market tightens, according to the Organisation for Economic Co-operation and Development.

Inflation will rise to 1.7 percent by the end of next year from 0.9 percent in 2013, the OECD predicted in a report released today. The unemployment rate is forecast to fall to 6.7 percent as the economy nears its potential amid a weaker currency.

Business investment, stoked by low capital costs and elevated commodity prices, will combine with exports to boost economic growth, offsetting weaker consumer and government spending, though the shift will depend “heavily” on U.S. growth, the OECD said. Canada’s economy will grow 1.4 percent this year and 2.3 percent in 2014, the agency said.

Bank of Canada Governor Mark Carney makes his last interest-rate announcement today from a statement due at 10 a.m. in Ottawa. Stephen Poloz, head of the nation’s export-financing agency, takes over as governor on June 3.

To contact the reporter on this story: Andrew Mayeda in Ottawa at amayeda@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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