History shows a recession has been unavoidable after interest rates rise this fast. Find out more.
has been unavoidable after rates rise this fast, and that the resilience could make for a tougher fight ahead against inflation.While there is the risk of needing higher rates to cool the economy, there is the potential for the resilience shown so far to lead to the gentle cooling that policymakers are attempting, said Scotiabank chief economist Jean-Francois Perrault.Article content
“It’s a worrisome thing in the sense that maybe it means you do have higher rates,” said Perrault. “The flip side of that is maybe this Holy Grail of a soft landing is no longer mythical, that we might actually engineer that.” TD chief economist Beata Caranci said the health of the economy, along with the fact that many industries like manufacturing are still pretty lean on hiring trends, means that a recession will likely mean far fewer job losses than usual.
“We have about 100,000 job losses occurring this year, which will not be mild or that 100,000 and their family, if it occurs. However, that is a third of what would normally occur in a recession.”RBC chief economist Craig Wright said the bank is sticking to its forecast of a recession that it’s been predicting since last July, as a number of long-term tailwinds including free trade, cheap credit and low-cost labour, reverse.
He noted the effects of the rapid rate increases still haven’t played out because of the lag on how long it takes to hit the economy.Wright however expects the slowdown, purposefully imposed through interest rates, will do its job and have inflation back to the Bank of Canada’s target range of one to three per cent by the end of the year.
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