The economy still hasn’t felt the full impact of the previous seven hikes, and is already struggling, according to experts.
risks pushing the Canadian economy into a deep recession that could cost hundreds of thousands of people their jobs, a growing number of economists worry.
“I’m still convinced we’re likely facing a recession this year and it will be all the deeper if the Bank of Canada continues this single-minded crusade,” said Stanford, chief economist at the Centre for Future Work. In an attempt to get inflation under control, the Bank raised the overnight lending rate seven times in 2022, most recently bumping it by 50 basis points to 4.25 per cent in early December. The overnight rate began last year at 0.25 per cent, where it had been since the Bank dropped it three times in one month in March 2020, as the global COVID-19 pandemic was declared.
“The most aggressive policy rate increase in a generation is taking its toll on the economy,” Arseneau and Schleich wrote in a research note. A survey released last week by the Bank of Canada found consumers are keeping a wary eye on their spending because they expect inflation to keep soaring. Bank of Canada governor Tiff Macklem has made it clear, said Stanford, that he’s committed to bringing inflation down to the Bank’s target of two per cent. Despite last year’s series of hikes, the Consumer Price Index — a broad-based measure of inflation — was 6.3 per cent higher in December than it was a year earlier, Statistics Canada announced last week.
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