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Letter to the editor

Interest rate hike expected as economy, dollar surge

By JIM FOX
Published July 8, 2007

Canadians are facing higher interest rates in an effort to cool a red-hot economy and dampen inflationary pressures.

The Bank of Canada is expected to make the first interest rate increase in a year on Tuesday and follow with another increase in September.

Analysts predict the rate will rise by 0.25 percent each time, to 4.75 percent, and perhaps be followed with more increases in the fall.

Adding fuel to the rate speculation was a report Friday showing the economy created almost 200, 000 jobs this year with unemployment at 6.1 percent, a 33-year low.

Bank Gov. David Dodge has warned that higher rates could be needed to rein in inflation, now at 2.2 percent.

There are concerns that higher rates will further push up the value of the Canadian dollar, now at 95 cents U.S. This affects the country's manufacturing industries by making Canada's products more expensive internationally.

Ontario Finance Minister Greg Sorbara said the province has lost 140, 000 manufacturing jobs in the last four years and a higher dollar will threaten more.

There's concern in the oil patch, too. Alberta Finance Minister Lyle Oberg said that for every cent the dollar rises, his province loses $123-million in revenue.

Committed to mission

Six more Canadian deaths in the Afghanistan conflict haven't dampened Prime Minister Stephen Harper's resolve to keep troops there until 2009.

A powerful roadside bomb killed the soldiers and an Afghan interpreter.

Opposition politicians are leading the call for Canada to withdraw from the war-torn nation as 66 Canadians have now died there.

Harper, who was speaking in Halifax while announcing $3.1-billion in new funding for the navy, said the government doesn't treat military deaths lightly but will stay the course and maintain the current operation.

In brief

- Restoring dignity to the storied Royal Canadian Mounted Police is the first challenge for its new commissioner, William Elliott. Appointed by Prime Minister Harper, Elliott is a career bureaucrat and the first civilian to head the police. He succeeds Giuliano Zaccardelli, who resigned in December after scandals in which Canadian Maher Arar was wrongly branded a terrorist and tortured in Syria, and the management of a police pension fund was investigated.

- The higher-valued Canadian dollar has cut the number of Americans shopping in Canada for prescription drugs. The Minneapolis Senior Federation no longer holds bus trips to Winnipeg for cheaper drugs. There are still significant savings on many popular medicines, but sales have dropped by about half, to around $500-million a year, said Gord Haugh of the Canadian International Pharmacy Association.

- Royal LePage Real Estate Services forecasts Canada's national average house price will rise by 9.5 percent this year to $303, 300. Robust conditions should continue in all regions while there will be double-digit gains in Edmonton, Calgary, Winnipeg and Regina, the company said.

Facts and figures

Canada's dollar ended the week at 95.33 cents U.S., its highest level since May 1977, while the U.S. dollar returned $1.0489 in Canadian funds.

The Bank of Canada's key interest rate is 4.25 percent while the prime lending rate is 6 percent.

Canadian markets are higher, with the Toronto Stock Exchange index at 14, 118 points and the Canadian Venture Exchange 3, 249 points.

Lotto 6-49: Wednesday 20, 25, 26, 39, 42 and 44; bonus 10. (June 30) 6, 12, 25, 43, 45 and 47; bonus 31.

Regional briefs

- The Microsoft Canada Development Center is to open in September in suburban Vancouver. Canada was chosen partly because it is easier to recruit international software stars with the country's immigration policies than it is for its headquarters in Redmond, Wash. About 300 people will be employed initially. Canada is the third-largest source of recruits for Microsoft, behind India and Japan.

- The Quebec government plans to ban the use of hand-held cell phones by drivers. Other measures to cut traffic deaths in Quebec, the worst in Canada, are tougher penalties for speeding and drinking and driving. Transport Minister Julie Boulet said that photo radar will be tried and that new drivers will have a longer probation period.

- Opposition politicians say the first legislative session of Premier Shawn Graham's recently elected Liberal government has made New Brunswick a less attractive place to live and invest. The government reversed an election promise and raised personal and business income taxes while power rates jumped by almost 10 percent.

- The pies from Porno Pizza in Winnipeg are hot, hot, hot. Corey Wildeman said business at his delivery-only business is brisk for the slices that include a saucy image in each box. Most customers are women, he said.

Jim Fox can be reached at canadareport@hotmail.com.

[Last modified July 8, 2007, 01:17:53]