Where Are Interest Rates ACTUALLY going???

Here is an excerpt from today’s Globe and Mail titled “Canadian Dollar on run to $1.05 as Ben Bernake ‘hits the panic button’ “.

“The loonie is now above $1.03 and expected to go higher still as the U.S. dollar weakens in reponse to the Fed's latest moves.

As The Globe and Mail's Kevin Carmichael reports, Fed chairman Ben Bernanke and his colleagues took aggressive steps to bolster the recovery and deal with America's unemployment crisis.

That included a fresh bond-buying scheme - the latest round of quantitative easing, or QE3 - and a pledge to hold the Fed's benchmark rate at an emergency low through to at least mid-2015.

At the same time, officials of the U.S. central bank cut their projections for economic growth this year, though they took a more optimistic view of 2013.

The U.S. is hobbled by unemployment, with more than 12 million Americans out of work.

Markets shot up yesterday, and the rally continues today.

Senior currency strategist Camilla Sutton of Bank of Nova Scotia believes the Canadian dollar could reach $1.05 next week, and then bounce around in a range of $1.01 to $1.05 over the next few weeks.

Of course that "turns up the pressure" on Canada's exporters, who have already been hurt by the strong currency.

Western Canada, however, is enjoying a run-up in oil prices, while gold producers and investors watch bullion continue to climb.

"Not only do we have QE3, but we have the threat of QE4," Ms. Sutton jokes, referring to Mr. Bernanke's promise to go even further if need be.”

 Most investors would interpret this as meaning Canada will likely follow suit with keeping rates low for the next 2 years.    

Why would this be the case?….I can still hear my professor’s booming voice in my economics class at U of G…..

“What happens when interest rates go up in Canada!!?”……

1.       Foreign investment increases as higher interest rates attract foreign capital.
2.       Value of Cdn Dollar increases further as foreign money pours in.
3.       Cdn exporters are hurt by increased dollar value.

However, Mike Moffatt explains in the video below that this means Canada will likely RAISE interest rates sooner than expected.

http://www.theglobeandmail.com/report-on-business/video/video-economy-lab-how-fed-move-could-mean-earlier-rate-raise-for-canada/article4543345/?from=4544546

My question to Mike would be…..How can you assume that QE3 will have a much better effect than QE1 and QE2??

I don’t pretend to be an economics professor and I certainly don’t know what the Fed is thinking, but I do know one thing…..No one can be 100% accurate in their prediction of the future.

Short term, the Canadian economy is still very fragile and the US is in far worse shape.   To me, raising rates in Canada anytime soon seems unlikely….especially with the US “hitting the panic button”.

Does anyone else have thoughts on this?