OTTAWA — Bank of Canada Governor David Dodge is being warned off raising interest rates during a Meech Lake, Que., meeting with provincial finance ministers Wednesday.
Ontario Finance Minister Greg Sorbara said that he will urge the central bank governor not to raise rates because the surging value of the Canadian dollar, compared to its U.S. counterpart, has already hammered manufacturers.
“My arguments to Mr. Dodge today will be that he should be very, very concerned about the impact on Canadian manufacturers as he goes about the business of setting Canada's monetary policy,” Mr. Sorbara told reporters as he entered a meeting with federal Finance Minister Jim Flaherty and his provincial counterparts.
Mr. Dodge warned May 29 that interest rates would likely soon have to rise to stifle inflationary pressures.
The bank's next rate-setting occurs July 10. The key interest rate has been on hold for a year, at 4.25 per cent.
Last week, on June 13, Mr. Dodge confirmed that higher rates would come soon, but suggested the case for sustained rate increases is not so clear-cut, mainly because of the soaring dollar.
Inflation and economic growth have both been stronger than the central bank anticipated, Mr. Dodge said June 13, adding that at the same time the currency is also surprisingly robust.
“Since April, we have seen two things: an increased risk of future inflation and a rise in the Canadian dollar that appears to have been stronger than historical experience would have suggested,” he said last week in St. John's.
“You have two forces that are sort of competing,” he told reporters.
© The Globe and Mail
