According to the Organization for Economic Co-operation and Development (OECD), the Bank of Canada should start raising interest rates as soon as possible so the economy does not become overstimulated.
The OECD watches economic conditions for 31 of the world’s most developed countries.
The OECD went on to say that these temporary stimulus measures, such as low interest rates stand to overstimulate the economy if it is left in place for too long.
In April we had the Bank of Canada hint that they could begin raising its key lending rate from its historical low of 0.25% as early as June 1st. The issues that currently lie are the fears that debt troubles in Europe could slow the economic recovery have raised speculation that the central bank could hold off until later this year.
The OECD has predicted that Canada’s economy will grow by 3.6% in 2010 and 3.2% in 2011. This is a far more optimistic forecast than the last release in November, where we saw the OECD predict growth would be 2% this year and 3% in 2011.
It was also said that the pace of Canada’s recovery is expected to moderate forward as stimulus measures are withdrawn, households pay down debt and manufacturers finish rebuilding inventories.