"The most important uncertainty, as I've highlighted here, is how much of an output gap is there, how much capacity is there in the economy"
- Stephen Poloz, Bank of Canada Governor
While the OECD forecasts accelerating growth for Canada over the next two years, but warns the nation's central bank may have to raise rates earlier than expected, the BoC Governor Stephen Poloz stressed out that weak inflation and growth are top concerns and said that he does not share the global economic think-tank's opinion that he should hike interest rates as soon as late 2014. The central bank said last month that it will not touch interest rates in the foreseeable future, a major policy shift after stating 18 straight months that rate hikes were looming. Inflation has been persistently well below the bank's 2% target, while economic growth has been disappointing. Nevertheless, the OECD believes that there will a pickup in exports and business investment in Canada in the coming two years, but there is a threat of "disorderly correction" in residential real estate. Building should drop, as the current supply level outstrips demand, according the OECD's global economic outlook report. A dramatic decline in house prices may erode spending power at a time when Canadians have high household debt.
In the meantime, higher sales in Canada's farm products and car parts sectors boosted a modest increase in September's wholesale trade, signalling a sluggish economic growth for the month. Wholesale trade rose 0.2% to $49.8 billion following a downwardly revised increase of 0.4% a month earlier.
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