The impact of rising dollar and mortgage rates is causing concern for various sectors of Canadian economy, according to an economic expert.
Major banks boosted mortgage rates by up to three-tenths of-a-percentage point Tuesday. The new one-year closed rate at most banks will be 6.85 per cent.
This news comes as the dollar closed Tuesday at its highest closing in almost 30 years at 93.15 cents U.S.
The loonie rose almost three-quarters of a U.S. cent to 93.29 cents US, which is its highest level since September 1977.
Economists point to signs that the Bank of Canada will raise its overnight rate at its next setting -- on July 10 -- as one of the primary factors behind the rate increases.
The Bank of Canada left its key overnight rate unchanged at 4.25 per cent Tuesday but warned that it's prepared to hike interest rates to help curb inflation.
Private economists and bank watchers have speculated that bank governor David Dodge would not raise interest rates without first preparing the markets for change in policy.
Observers noted Tuesday's report was as clear a warning as ever that the central bank intended to raise interest rates.
Some industry sectors are concerned at the implications of the rising rates.
The Canadian Auto Workers are planning a march on Parliament Hill Wednesday, to protest the major loss of jobs in the industry and in part because of their concern over how the rising Canadian dollar will impact their industry.
TD Securities chief economic strategist Mark Levesque told CTV's Canada AM that while he believes the Canadian dollar rate is a factor, auto workers are also facing many structural challenges in their industry.
Levesque also acknowledged; however, that the rising dollar would impact segments of the Canadian economy.
"The broad-based manufacturing sector is being very, very heavily hit by this. You're looking at a sector that is very heavily export-oriented," he said.
Levesque also acknowledged that Canada's tourism industry would be affected, but does not believe the Bank of Canada should adjust any upcoming plans over those fears.
"Some are clamouring for the Bank of Canada for example to not raise interest rates but that would create its own set of problems," he told Canada AM.
"The Bank of Canada only has one instrument and that's its interest rate. It can only have one policy objective and that's keeping inflation under wraps. So, the Bank of Canada really does not have the tools to solve differences in growth between regions or differences in growth between industries."
The responsibility of ensuring that various industry sectors are not adversely affected by rate increases, Levesque said, lies with the federal and provincial governments.
With files from The Canadian Press
