UPDATE 1-Bank of Canada should raise rates in late 2013-IMF

Wed Dec 19, 2012 2:40pm EST
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* IMF says BoC should resume modest tightening in late 2013

* Projects growth of 1.8 pct in 2013, 2.25 pct in 2014

* Says U.S. fiscal cliff, European crisis biggest threats

* Warns on household debt, says tighter policies may be needed

* Says Canadian dollar overvalued

By Claire Sibonney

TORONTO, Dec 19 (Reuters) - Canada's economy should start ramping up in the second half of next year following a couple years of sluggish growth, allowing the Bank of Canada to resume raising interest rates by the end of 2013, the International Monetary Fund said on Wednesday.

In a report that warned about the threat to the Canadian economy from the U.S. "fiscal cliff," a worsening euro zone debt crisis, and high levels of household debt, the multinational agency said real economic growth likely slowed to 2 percent this year. It expects growth of just 1.8 percent in 2013.

But it said the economy will start accelerating part way through next year, paving the way for growth of 2.25 percent in 2014. The IMF's World Economic Outlook in October had forecast Canadian real GDP growth of 1.9 percent in 2012 and 2 percent in 2013.   Continued...