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Economic reports last week suggest output growth probably accelerated to faster than a 2% annualized pace in the first quarter while quickening U.S. job growth may herald improving demand from the country that buys three-quarters of Canada’s exports. The central bank has signaled borrowing costs may rise to contain record household debts, even as G-7 counterparts ease policy to spur growth.

We are transitioning away from a purely domestically led recovery to one led by the U.S.

“Their very mild bias will look appropriate for a little longer yet,” said Doug Porter, chief economist with Bank of Montreal in Toronto, who raised his 2013 growth forecast to 1.6% last week. “We are transitioning away from a purely domestically led recovery to one led by the U.S.”

Four of 10 economists surveyed after Poloz’s May 2 appointment said the tightening bias will remain, and another four said the odds it would be dropped are 30% or less. One respondent said the odds of the bias being removed were about 50% after Poloz takes over, and the other Carney would remove the bias before he leaves.

Carney makes one more rate decision on May 29, and Poloz follows up at a July 17 announcement that includes a new quarterly economic forecast.

Export Slump

An export slump late last year led the central bank’s six- member policy group headed by Carney to soften language about raising borrowing costs and reduce the 2013 growth forecast to 1.5% from 2%.

Poloz said the bank has done “a superb job” guiding the economy and “laid the groundwork for recovery” when asked if monetary policy would continue after he takes over. Carney told reporters May 2 in Edmonton, Alberta, that there is “a bit more momentum” in the economy than the bank previously thought.