The Canadian Economy: A Closer Look at the Technical Recession and Interest Rate Hikes
In recent times, there has been a growing concern about the state of the Canadian economy. Various economists have weighed in on the matter, offering their insights and predictions on the future trajectory of Canada’s economic growth. In this article, we will delve into the key points raised by these experts, providing an in-depth analysis of the technical recession and its implications for interest rate hikes.
What is a Technical Recession?
A technical recession occurs when a country experiences two consecutive quarters of negative GDP growth. This threshold is often used as a barometer to gauge the overall health of an economy. In Canada’s case, the preliminary industry data for Q3 suggests that the economy may be on track to experience its second consecutive quarter of decline.
The Views of Various Economists
Several prominent economists have shared their thoughts on the matter:
- Andrew Grantham, CIBC Economics: "The Canadian economy is already skirting a recession… The fact that the economy appears close to tipping into a mild recession already clearly reduces the likelihood of any further interest rate hikes."
- Stephen Brown, Capital Economics: "We forecast a five per cent fall in house prices over the next six months and assume that some degree of labour hoarding will result in just one full quarter of employment losses… If either of those assumptions proves too optimistic, then GDP would likely decline by much more than we have assumed."
- Marc Ercolao, TD Economics: "Higher interest rates are certainly doing their part to tamp down excess demand, and we continue to expect below-trend growth for the next couple of quarters… The Bank of Canada should feel confident that their rate hikes are working to pull the economy back into balance."
- Benjamin Reitzes, BMO Economics: "This is yet one more crystal clear sign that the Bank of Canada should be done hiking. The potential for a second consecutive negative quarterly GDP reading will cause recession chatter to ramp up quickly."
- Jay Zhao-Murray, currency analyst, Monex Canada: "We anticipate that the economy will enter a somewhat more pronounced recession around the start of 2024… Which would put pressure on the Bank of Canada to begin cutting rates before the (United States) Federal Reserve."
Implications for Interest Rate Hikes
The collective views of these economists suggest that the Canadian economy is likely to experience a technical recession. This, in turn, raises concerns about the impact of interest rate hikes on the economy. While some experts believe that further interest rate hikes are unlikely, others predict that the Bank of Canada may be forced to cut rates in the near future.
Conclusion
In conclusion, the views of various economists suggest that the Canadian economy is likely to experience a technical recession. This raises concerns about the impact of interest rate hikes on the economy and prompts questions about when and how the Bank of Canada will respond.
