Is Canada's benchmark interest rate going to go up, or is it going to stay where it is or even go down?

Just last month, the Bank of Canada dropped a mini-bombshell by adopting a neutral position on interest rates, after long insisting that any eventual move would be up. That left open the real possibility the central bank may, instead, lower borrowing costs — at least until the struggling economy regains its momentum.

Now, the global think-tank that helps guide countries along a growth path says Canada’s central bank may actually resume its course for higher rates — beginning as early as next year — as that economic momentum returns and inflation starts to pick up speed, reports the Financial Post‘s Gordon Isfeld. “With spare capacity narrowing by the end of 2015, monetary policy tightening may need to begin by late 2014 to avoid a build-up of inflationary pressures,” the Organization for Economic Cooperation and Development said Tuesday.

The first move above the bank’s current 1% lending level — where it has been since September 2010 — will likely come in the fourth quarter of 2014, the Paris-based organization said in the report, and continue rising to 2.25% by the end of 2015.

Source Financial Post