The Bank of Canada should cut interest rates to offset the loonie's flight, Jayson Myers, senion economist for a leading business lobby group, said Wednesday.

The rising dollar will be a drag on the economy and hurt profits, said Myers, who works for the Canadian Manufacturers & Exporters. The group's members account for 75 per cent of Canada's manufacturing output and 90 per cent of exports.

Because of the dollar's increase – up about 8 US cents since the begining of the year to more than 71 cents US , or 13 per cent – Canadian companies are facing lower export sales to the key U.S. market, are profits are already falling.

"At the very least, the Bank should hold the line on interest rate increases. The Bank should also give serious consideration to cutting rates during the second half of this year," he said.

The dollar's rise makes it cheaper for Canadian companies to import the technologies, components and services necessary to increase productivity.

And higher productivity is ultimately the only way exporters can compete with a higher dollar.

"But companies need time to adjust and that is very difficult during a period of rapid currency appreciation," Myers said.

"Those difficulties are aggravated by the prospect of even higher interest rates, causing further upward pressure on the dollar," he said.

So the Bank "should consider lowering interest rates to ease the transition to a high dollar environment."