Economists say a soft landing for Canada’s economy has become a ‘remote possibility’

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As hawkish central bankers continue to press ahead to control inflation, more economists are turning to the idea that a soft landing for the economy is increasingly unlikely.

Since March, the Bank of Canada has raised rates by 300 basis points and is showing no signs of stopping.

“BIS research indicates that pre-loaded price increases ‘could help prevent a hard landing,’” RBC Chief Economist Josh Nye said in a report Monday. An unattainable possibility.”

Economists had expected the Bank of Canada to do so Raising interest rates by 75 basis points advance this month. Follow this elevation Full percentage point increase in July There was speculation that the bank would halt its most aggressive session in a decade at 3.25 per cent.

However, the policy statement has pushed that theory. “The board is still ruling that the policy rate will need to go up further,” she said, prompting many economists to raise their interest rate expectations.

RBC, which previously forecast a 25 basis point rise in October, now expects a 50 basis point increase next month and another 25 basis point increase in December to raise the rate to 4 percent, up from its previous forecast of 3.5 percent.

This comes even as the economy’s momentum begins to wane, Nye said. He said that while the Canadian economy showed strong growth in the second quarter, most of it came early in the second quarter. Labor market Also showing signs of slowing downWith employment declining for the third month in a row and the unemployment rate rising.

RBC forecasts recessions in Canada, the US, the eurozone, and the UK next year. In Canada, the slowdown should be moderate with the unemployment rate rising 1.7 percentage points from bottom to peak over the next year and a half, you expect.

Oxford Economics also expects a 50 basis point rise in October, followed by a mild recession in late 2022, caused by the impact of higher interest rates, a deepening housing correction and a downturn in the US and other economies.

“We have warned for some time that an overly aggressive Bank of Canada presents the biggest downside risk to the economy,” said Tony Stillo, director of Canadian economics at Oxford. “We now believe that such rapid monetary policy tightening due to Canada’s highly interest-sensitive economy, combined with the deteriorating external environment, makes a recession the most likely outcome for the economy.”

A majority of economists in a recent Finder poll agree. And 78 percent now expect a recession, compared to 69 percent in July and 50 percent in June.

Most think deflation will come in the first quarter of 2023, but 11 percent say Canada is already in a recession.

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  • Scotiabank 26th Annual Back to School Conference

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  • Nadine Ahn, Chief Financial Officer of RBC, will speak at the Barclays Global Financial Services Conference in Toronto

  • Statistics Canada publishes its investment in building construction data

  • The Association of Building and Housing Professionals of Quebec will host a discussion on the topic of housing

  • At the Federation of Quebec Municipalities’ Major Cities Conference, the mayors of the 10 largest cities in Quebec will hold a press conference to present their common demands to the next Quebec government in order to enable municipalities to deal with climate change.

  • Today’s data: Note on the US consumer price index

  • gains: Roots, WildBrain

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Canadian household debt in relation to its income rose higher in the second quarter as our debt grew faster than our earnings, Statistics Canada said on Monday. Disposable income for households rose to 181.7 percent on a seasonally adjusted basis in the second quarter, up from 179.7 percent in the first quarter. That means there was about $1.82 of credit market debt for every dollar of household disposable income in the second quarter. Today’s chart from Statistics Canada shows household credit market debt to household disposable income, seasonally adjusted.

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Today’s Posthaste was written by Pamela Heavin (Tweet embed), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

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