OECD urges Ottawa to raise interest rates to save economy

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The Organization for Economic Co-operation and Development One once again raise the issue of financial-stability risks of high household debt and rising house prices in Canada. It added that gross domestic product in Canada is expected to expand by 1.7 per cent in 2016 and a GDP growth of 1.7 per. But the Paris-based OECD expects Canada’s GDP to reach 2.2 per cent next year — in line with anticipated U.S. growth — while the global average accelerate to 3.3 per cent. The Bank of Canada responded to the collapse in the energy sector by cutting its key interest rate twice last year — taking it to 0.5 per cent.

The OECD viewed the $120 billion stimulus spending on infrastructure projects over the next 10 years favorably estimating it could boost GDP growth by about 0.5 per cent in both 2016 and 2017.  But the OECD also recommends Canada’s central bank begin gradually raising its trendsetting lending level. “Gradual increases in policy interest rate are assumed from late 2016 to stabilize inflation around two per cent.” It also emphasized that “very low borrowing rates have encouraged household credit growth and underpinned rapidly rising housing prices — particularly in Vancouver and Toronto — which together are a third of the Canadian housing market.”
“In relation to household incomes, both house prices and household debt are high,” the OECD said. – CINEWS

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