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Growth in Canada slowed relative to the U.S. and other countries when the oil price shock hit in 2015, but that followed several years of outperformance.

“The pause in 2015 and, to a lesser extent last year, has clearly ended,” said Nathan Janzen, senior economist at RBC Capital Markets. “It is important to remember that higher interest rates mean monetary policy will be ‘less supportive’ of growth not ‘more restrictive.’”

He noted that the current 0.5 per cent overnight rate is only slightly above the record-low 0.25 per cent rate during the worst of the 2008/2009 recession. During that period, Canada’s unemployment rate was two percentage points above current levels.

Janzen pointed to the advantages of initiating an earlier and more gradual rate-hike path, particularly when it comes to adjustments in the highly-leveraged household sector.

The economist also noted that growth in Canada during the past three quarters has led the G7 once again.

“Outperformance relative to other G7 countries dating back to pre-2008/09 recession levels never fully reversed over 2015 and 2016 and the gap is growing again,” he said.

David Doyle, an analyst at Macquarie Capital, is less optimistic. He thinks the BoC will hike on July 12, and again in October, but expects that will mark the end of the rate-hike cycle. That’s largely because the average of the BoC’s three inflation measures is only about 1.3 per cent.

“Recent currency strength should put further downward pressure on inflation readings,” Doyle said. “Moreover, wage growth remains subdued, hovering near a multi-decade low.”

He also warned that the dramatic growth in consumer leverage and real estate activity will make the impact of rate hikes more severe in Canada than in any previous period, and by a wide margin.

“Even 50 bps increases downside risks significantly,” Doyle said, adding that borrowers will be renewing their mortgages at higher rates for the first time since 2007.