TORONTO — A Bank of Montreal economist says the soaring loonie is here to stay and Canadians should get used to their currency being above the U.S. dollar for some time to come.
Douglas Porter says the loonie is likely to stay above par right through 2012 and possibly even longer than that.
He says that has some advantages and some drawbacks for the Canadian economy.
The BMO economist says a strong loonie will help keep a cap on inflation, holding prices lower than they could be, and will tend to keep interest rates relatively low even as the Bank of Canada begins an expected campaign to start raising rates.
But Porter also says there’s a price gap, with a basket of goods picked by the bank 20 per cent more expensive in Canada than south of the border.
Porter says a strong dollar will help Canadian businesses spend more on new machinery and equipment as the price of imported gear drops, but that won’t necessarily translate into higher industrial productivity.