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Joggers run past the Bank of Canada building in Ottawa.
Joggers run past the Bank of Canada building in Ottawa.
(CHRIS WATTIE/REUTERS)

Sorry, doomsters: Interest rates will rise but no cataclysm looms

The trajectory of the Canadian economy depends on interest rates. With a housing market that looks more and more like a bubble and record levels of household debt, a sharp rise in the cost of borrowing would cause immediate and lasting damage to economic growth.

What are the odds of an interest-rate-led financial cataclysm in 2014? Any attempt to answer this question depends on the reality that Canada is a “yield-taking” country with interest rates largely determined by the U.S. bond market. Therefore, prognosticators must answer two questions: What will U.S. Treasuries do? And how will the Bank of Canada react?