Economists are divided the timing interest rate changes, following today’s monetary policy update from the Bank of Canada.

National Bank Financial says April, while Bank of Montreal thinks it won’t be until September.

NBF notes that back in October 2004, the central expected the Canadian economy to grow slightly less than 3% in 2005 (2.9%) and by slightly more than 3% in 2006 (3.2%). ‘The latest projection still follows the same pattern, even though the ups and downs are slightly more accentuated; 2.8% in 2005 and 3.3% in 2006,’ it reports. “In our view, these slight revisions do not call for a reversal of the recent trend in monetary policy adjustment in Canada.”

“The past appreciation of the loonie and its dampening impact on the economy and on inflation are creating a situation where our monetary authorities can afford a ‘measured pace’ in their actions,” NBF notes. “Given its forecast of inflation moving back to 2% by the end of 2006 rather than 2005, the Bank is in no rush for the time being.”

“For our part, we are sticking with our view that by April there will be enough economic momentum — we expect Canadian GDP growth in excess of 4% in Q1 — to prod the Bank into action with a “measured” 25 basis points rate increase,” NBF concludes.

BMO says that the Update is more hawkish than the policy statement accompanying Tuesday’s rate decision. And, believes that it’s, “consistent with our view that the Bank will refrain from raising rates until September.”

“Thereafter, the overnight rate is projected to climb gradually from the current 2.50% to a more neutral level of 4.50% by early 2007,” it says. “Unexpected continued weakness in the economy, however, could spur a rate reduction.”