Bank of Canada Governor Tiff Macklem says he still expects the country to avoid a recession this year, even as the economy showed signs of shrinking in June and faces what he called an “unusual degree of uncertainty.”Speaking to reporters, Macklem said early 2025 growth was inflated by a surge in exports ahead of U.S. tariffs, resulting in a 2.2% GDP increase in the first quarter. “In the second quarter you are getting the payback,” he said.Blacklock's Reporter said although Statistics Canada has yet to release finalized numbers for the second quarter, the Bank of Canada’s latest Monetary Policy Report estimates growth contracted. It now forecasts a modest 1% expansion for the second half of 2025 under current tariff conditions..Despite the weaker numbers, Macklem repeated his stance that the country is not headed for a recession. “The third and fourth quarters, you get modest growth I think is the message,” he said. “We have to put more weight on the risks, look over a shorter horizon than usual and be ready to respond to new information.”The central bank held its key interest rate steady at 2.75% and will review it again on September 17.Macklem has consistently forecast slow but continued economic growth, telling Canadians last December that a recession was not expected. At the time, the interbank loan rate was 3.75%..He noted that while the overall labour market is softening, it is not collapsing. “We haven’t seen widespread layoffs,” said Macklem. “We haven’t seen widespread job losses. But with an unemployment rate of 6.8% and youth unemployment having risen quite a bit, there is clearly some slack in the labour market.”Pressed on whether Canada’s slowdown qualifies as a recession, Macklem deferred. “I’ll let people decide what adjective they want to put on it,” he said. “The traditional definition of a recession is two negative quarters of growth in a row. The Canadian economy is growing.”Macklem also acknowledged that past Bank of Canada forecasts have fallen short.“It’s not like we got everything right,” he told the Senate banking committee in 2022. The Bank previously predicted inflation would stay below 2% in 2023 and called early inflation spikes “transitory,” only to see it rise to 6.7% within months.
