Wednesday, July 19, 2017

Higher interest rates will increase Ottawa’s budget deficits, report warns - BILL CURRY, Globe and Mail

A new forecast warns that rising interest rates will ultimately produce larger deficits as the federal government faces higher borrowing costs on its $637-billion debt. Canada’s economy is now humming along, with new April GDP data showing a strong start to the second quarter. Several consecutive months of positive economic news have increased expectations that Bank of Canada Governor Stephen Poloz will start increasing interest rates in July, which is much sooner than most observers have been expecting. But a new fiscal forecast from the University of Ottawa’s Institute of Fiscal Studies and Democracy predicts higher-than-expected borrowing costs will throw off Finance Minister Bill Morneau’s deficit projections over the coming years.

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