Slower growth, lower interest rates and a strong Canadian dollar will be the key economic trends into 2008, according to the latest economic outlook from Scotia Economics.

Its latest Global Outlook report, Scotia says the recent U.S. Federal Reserve decision to cut interest rates has put U.S. monetary policy out of sync with the more cautious stance in Canada, Europe and Japan.

Warren Jestin, Scotiabank’s chief economist, says this divergence will widen into 2008 as the Fed brings in more rate cuts.

The report also says the Bank of Canada has moved out of tightening mode and is expected to be very cautious about reversing direction.

However, with the loonie trading close to parity against the U.S. dollar and exports dampened by weakening trends in the United States, the central bank may opt to cut rates by half a percentage point around year-end.

But Jestin says rate cuts won’t be as deep as those in the U.S. because output growth, job gains, the housing market and consumer spending are all stronger here and are “likely to remain that way.”