The Bank of Canada (BoC) will not provide interest rate relief in 2023, even with the risk of a recession, according to BoC Governor Tiff Macklem..BoC data showed the interest rate hike cost households billions of dollars.. Bank of Canada .“Based on the information we have today, the implied expectation in the market that we are going to be cutting our policy rate later in the year, that doesn’t look today like the most likely scenario to us,” Macklem told reporters..The Bank yesterday kept its prime rate on interbank loans unchanged at 4.5%.."Does that mean you are ruling out a recession this year?” asked a reporter..“We do expect growth to be weak,” replied Macklem..“It is expected to be weak through the rest of the year, picking up gradually over the course of next year.”.“We can’t rule out that there are going to be a couple of quarters of small negatives,” said Macklem..“We are not forecasting a major contraction. We are not forecasting large increases in unemployment, and in that sense, it’s not what people associate with the word ‘recession.’”.According to Blacklock’s Reporter, the Bank in a monetary policy report, acknowledged previous interest rate hikes, eight in ten months, cost Canadians billions..“The effective interest rate on household debt is estimated to have risen to 5.5% in the first quarter of 2023,” said the report..“Interest payments rose to $133 billion on an annual basis in the fourth quarter of 2022, 45% higher than one year earlier,” said the report..“The share of income spent on interest payments will continue to rise as homeowners renew their mortgages.”.“Consumer spending is anticipated to be subdued beginning in the second half of 2023 and into 2024 as the effects of the tightening in monetary policy work their way through the economy,” said the report..“Household spending is affected.”.“I know many Canadians are still struggling,” Macklem told reporters. He noted food inflation remains above 10%..“As mortgages are renewed at higher rates more households will feel the restraining effects of monetary policy,” said Macklem..“Business investment is also expected to soften in the year ahead, dampened by weaker demand for Canadian exports and higher financing costs.”.“Taking these forces into consideration, we expect Canadian GDP growth to be weak for the rest of this year before beginning to pick up gradually in 2024 and through 2025,” said Macklem..“On an annual average basis, this suggests growth will slow from 3.4% last year to about 1.4% this year and 1.3% in 2024 and then pick up to 2.5% in 2025.”
