Economic growth to slow from oil prices, not rate increases TORONTO, Oct. 7 /PRNewswire-FirstCall/ -- The long anticipated rise in interest rates may be coming to an early and abrupt end as the spectre of a sustained $50 per barrel oil prices lead to a slowdown in North American economic growth next year according to CIBC World Market's Economic Forecast. "As the world's largest importer of crude, all of a sudden prospects for the once hot US economy don't look so hot anymore," says CIBC World Markets Chief Economist Jeff Rubin. "And just as suddenly, the hundreds of basis points of central bank tightening that investors had braced their portfolios for are rapidly being priced out of the market. Instead of losing momentum along an arduous march to higher interest rates, the North American economy will soon be feeling the brake of soaring energy prices." The CIBC World Markets forecast expects burgeoning Asian demand coupled with conventional supply depletion will keep oil prices above $50 per barrel for at least the next three quarters, and possibly longer depending on how long it takes sharply rising energy prices to quell world growth. "The run-up in oil prices is neither benign nor temporary," says Rubin. "With OPEC spare capacity at record lows and world crude demand growing at three times its long-run average, $50 per barrel crude prices are here to stay, at least as long as the US and Chinese economies continue to power robust growth." Rising oil and natural gas prices will create a revenue bonanza for Alberta, which could see provincial oil and gas royalties double over the next year. And $50 per barrel oil prices are likely to trigger more investment in the increasingly strategic tar sands. But high energy prices will be a significant drag on economic growth in central Canada, where much of the country's energy-intensive manufacturing is housed. Exporters will face the additional challenge of a strong Canadian dollar, supported by higher interest rates in Canada than in the United States and by surging energy prices. The loonie is expected to peak at just over 80 cents early next year and trade in the 77-80 cent range over the balance of next year. CIBC World Markets' Economic Forecast is available at http://www.cibcwm.com/research. CIBC World Markets is a leading North American investment bank with niche capabilities in the U.K., Australia and Asia. CIBC World Markets delivers innovative full capital solutions to growth-oriented companies and offers advisory expertise across a wide range of industries, and provide equity and debt research. CIBC World Markets' parent company is CIBC, one of North America's first and largest financial institutions with offices in 18 countries, including the world's major financial centers. DATASOURCE: CIBC CONTACT: Jeffrey Rubin, Chief Economist and Managing Director, CIBC World Markets at (416) 594-7357, or Rod Cumming, Senior Manager, Marketing and Communications, CIBC World Markets at (416) 594-7774 or ; Archived images on this organization are available through CNW E-Pix at http://www.newswire.ca/. Images are free to members of The Canadian Press.

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