Bank of Canada seen raising rates in fourth-quarter

The Bank of Canada will raise interest rates sometime in the fourth quarter as a sturdy if unspectacular domestic recovery offsets global headwinds, according to according to a Reuters survey.

The median forecast of a Reuters poll of 37 economists and strategists was pushed back from a third-quarter hike view projected in a previous poll conducted in May.

The central bank is now seen holding its key policy rate at 1 percent in the third quarter. Of those still expecting a third-quarter hike, all of them predicted a 25 basis point rise in September. None expected a hike next week at the central bank's July 19 rate decision.

The poll was conducted between July 8 and July 12.

While some recent Canadian economic has been encouraging, it comes against a bleak global backdrop. Worries have spread about the euro zone debt crisis and there are signs of a stagnating recovery in the United States, Canada's largest trading partner.

"The soft patch that we obviously have in the U.S. right now we believe will prove temporary, that we'll get a little bit of a lift in the second half of the year," said Michael Gregory, senior economist with BMO Capital Markets.

"It does seem that Canadian growth continues to chug along, the output gap continues to close. If anything, I think the output gap may be even a little smaller than what the Bank of Canada is even estimating ... so that all points to the need to try and ratchet rates higher. They can't really wait until the Fed starts to go."