2023 is “not going to feel good,” Bank of Canada Governor Tiff Macklem said yesterday. He claimed that a long-forecast recession will follow another increase in the bank’s prime rate..“The economy is slowing and we expect it will continue to slow,” said Macklem. “We expect that growth through the next two, three quarters is going to be pretty close to zero.”.“That is an economy that is stalled. It is not going to feel good. That is basically no growth.”.According to Blacklock's Reporter, the Bank yesterday again raised its benchmark rate on interbank loans by a quarter point to 4.5%. The rate was 0.25% a year ago. The next rate review is due March 8, though Macklem said a further increase is not imminent. “Now it’s time to pause,” he said..“It’s working,” Macklem told reporters. “We are turning the corner on inflation.” The Governor said costlier interest rates “are slowing household spending” amid the worst inflation in 40 years..“Where is this confidence coming from that inflation is getting back under control?” asked a reporter. “I don’t want to minimize the risks,” replied Macklem..Opposition Leader Pierre Poilievre (Carleton, ON) yesterday called the interest rate rise, the eighth in in ten months, a “sucker punch” for Canadians who believed Bank of Canada forecasts. “A sucker punch, that’s what the Trudeau government hit Canadians with today by increasing interest rates after Trudeau and his government promised rates would stay low for long.”.“Should the Bank of Canada governor be fired?” asked a reporter. “Of course,” replied Poilievre..The Bank in a July 15, 2020 forecast predicted continued low interest rates. “We recognize households and businesses are facing an unusual amount of uncertainty,” Macklem said at the time. “Against that backdrop we are being unusually clear that interest rates are going to be low for a long time.”.The Bank yesterday in a Monetary Policy Report said inflation and interest rates will remain above pre-pandemic levels into 2024. “Higher unemployment could undermine homebuyer sentiment and lead to a larger than expected drop in house prices,” said the report. “This in turn could reduce household wealth, access to credit and consumer confidence.”.Consumer spending is projected to remain subdued through much of 2023, the Bank said. “The rise in borrowing costs is expected to continue to strain many household budgets.”.Macklem in testimony last November 1 at the Senate banking committee predicted a short recession in Canada. “It’s not a severe recession,” he said. Finance Minister Chrystia Freeland (University—Rosedale, ON) in a November 3 Fall Economic Statement confirmed a recession was likely. “Our economy is slowing down,” Freeland told the House of Commons..Other forecasters have predicted more economic wreckage. A recession will “hurt small businesses significantly,” Kevin Page, former Parliamentary Budget Officer, told the Senate banking committee December 1..David Dodge, former central bank governor, testified September 23 that Canadians should expect job losses. “Unemployment is going to rise,” said Dodge..“Zero growth rates after a period of 3% growth at annual rates that we’ve recently had is not going to feel so good,” said Dodge. “Yes, that’s going to happen.”
