Bank of Canada Governor David Dodge today repeated his position that interest rates will need to rise “over time”.

In a speech to the Canada-U.K. Chamber of Commerce in London, Dodge gave no hint as to the specific timing of such an increase. He said only that global and Canadian economic developments had been unfolding in line with his expectations.

“Our outlook [in May] for the Canadian economy through to the end of 2006 was unchanged from the one presented in our April Monetary Policy Report. The analysis in that report is still relevant,” he said.

The April policy report said economic growth in Canada would be 2.6% in 2005, down from its previous estimate of 2.8%. At the time, it said economic growth in 2005 and 2006 would come mainly from domestic demand, as net exports were expected to be a drag on the economy.

“We continue to see evidence that strong domestic demand is offsetting the weakness in net exports,” Dodge said in today’s speech.

The Bank of Canada has left its key overnight interest rate unchanged at 2.50% since last October. Most analysts expect the central bank to again stand pat when it makes its next scheduled interest policy announcement on July 12.

Further rate hikes are not expected in Canada until the fall.

In the United States, the Federal Open Market Committee is expected to raise interest rates by 25 basis point when it meets on Thursday. That would lift the federal funds rate to 3.25%.