*Says next rate hike will be in March 2013
*Cuts 2011 Canada growth outlook to 2.2 pct from 2.8 pct
*Sees 2012 growth of 1.9 pct, down from 2.5 pct
TORONTO, Sept 13 (Reuters) - A worsening outlook for the global and Canadian economies will keep the Bank of Canada from raising interest rates until at least March 2013, Toronto-Dominion Bank (TD.TO) forecast on Tuesday.
TD, Canada's second biggest lender, became the first of the country's big banks to push out its forecast for a rate increase into 2013, citing intensifying downside risks in the United States and Europe.
A Reuters survey of Canadian primary dealers last week, which was conducted after the central bank shifted to a less bullish stance on the economy, found most dealers forecast the bank's next rate hike would be in the third quarter of 2012. [CA/POLL]
"Although the Canadian economy has benefited from superior fundamentals and has led many other developed market economies in the recovery, the combination of strengthening international headwinds and domestic fatigue are expected to restrain economic growth over the balance of the year and into 2012," David Tulk, Canada macro strategist at TD Securities, said in a report to clients.
Overnight index swaps, which trade based on expectations for the Bank of Canada's policy rate, currently at 1.0 percent, have been pricing in a rate cut for some time. But the vast majority of economists and strategists still do not expect the Bank of Canada to reduce rates. TD expects rates to climb to 2.5 percent by the end of 2013, and to 3.5 percent by year-end 2014.
Tulk said the outlook could deteriorate further on continued market turmoil caused by the European debt crisis and the possibility of another U.S. recession.
With the bank's low-for-longer rate stance, TD said bond yields across the curve will remain at very low levels for the rest of the year and through most of 2012.
The Canadian dollar - sitting around C$0.99 on Tuesday - is also expected to weaken, slipping below parity to C$1.01 to the U.S. dollar in the third quarter and C$1.04 by the end of this year.
TD cut its targets for growth in gross domestic product to 2.2 percent in 2011 from the 2.8 percent it forecast in June, and to 1.9 percent in 2012 from 2.5 percent. Canada's economy grew by 3.2 percent in 2010.
TD also cut its outlook for global growth to 3.2 percent for both 2011 and 2012, from the 3.6 percent and 3.7 percent it forecast in June. (Reporting by Claire Sibonney; editing by Peter Galloway)