Canada is headed for recession and it is “not going to feel so good,” David Dodge, retired Bank of Canada governor, yesterday testified at the Senate banking committee. Dodge faulted his successors at the Bank for incorrect forecasts that were “not very helpful.”.He testified that unemployment is going to rise and economic growth will flatten to zero..“You stepped back from using the word ‘recession’ but let’s ask you about that,” said Senator Pamela Wallin (Sask.), chair of the banking committee. “Zero growth rates after a period of three percent growth at annual rates that we’ve recently had is not going to feel so good,” replied Dodge..“Yes, that’s going to happen and it is not going to feel good,” he said. “Putting a number on it, I would say zero over that period is a good guess but I think ‘guess’ is the operative word.”.According to Blacklock's Reporter, the Bank’s current Deputy Governor Paul Beaudry in a University of Waterloo lecture Tuesday said inflation and interest rates will remain above pre-pandemic levels for two years. Asked if a recession was imminent, Beaudry replied: “It’s certainly too early to call.”.Senator Clément Gignac (Que.), ex-chief economist for the National Bank, yesterday faulted Bank of Canada executives for giving bad advice to Canadians. “In 2020 the central banks, not only in Canada, mentioned interest rates would remain low for a while,” said Gignac. “As a result in Canada a lot of people bought houses at variable rate mortgages.”.“In 2020 the Bank of Canada mentioned, ‘You know what? Inflation will be transitory.’ Whoops,” said Gignac. “They give the impression they know a lot of things, more than us, and we start to realize they have no better clue than Wall Street economists.”.Successive Bank of Canada governors in the past two years issued a series of mistaken forecasts. Predictions subsequently proven wrong included:.• “The pandemic will have largely run its course by the middle of 2022” (Tiff Macklem, July 15, 2020);• “Interest rates are going to be low for a long time” (Macklem, July 15, 2020);• “Inflation is expected to remain less than 2% in 2023” (Macklem, November 26, 2020);• “Inflation will stay low” (Stephen Poloz, November 17, 2020);• “The inflation we’re observing right now is very likely to be transitory” (Poloz, May 18, 2021)..“My question is simple,” said Senator Gignac. “Do you think the central bank talks too much?” Replied Dodge: “I think it’s very hard to give guidance other than, ‘We’re going to watch and see what happens.’”.Dodge is a former deputy finance minister who served as Bank governor to his retirement in 2008. He is currently senior advisor with Bennett Jones LLP of Ottawa..“In August 2020 they changed their rules and basically said, ‘We’re not going to care about inflation,’” testified Dodge. “And then in August 2021 they said, ‘It’s all transitory’ – an unfortunate use of the word transitory.”.“Economists understood what they meant but in plain English it wasn’t very helpful,” said Dodge. “So I think there were big mistakes made.”
Canada is headed for recession and it is “not going to feel so good,” David Dodge, retired Bank of Canada governor, yesterday testified at the Senate banking committee. Dodge faulted his successors at the Bank for incorrect forecasts that were “not very helpful.”.He testified that unemployment is going to rise and economic growth will flatten to zero..“You stepped back from using the word ‘recession’ but let’s ask you about that,” said Senator Pamela Wallin (Sask.), chair of the banking committee. “Zero growth rates after a period of three percent growth at annual rates that we’ve recently had is not going to feel so good,” replied Dodge..“Yes, that’s going to happen and it is not going to feel good,” he said. “Putting a number on it, I would say zero over that period is a good guess but I think ‘guess’ is the operative word.”.According to Blacklock's Reporter, the Bank’s current Deputy Governor Paul Beaudry in a University of Waterloo lecture Tuesday said inflation and interest rates will remain above pre-pandemic levels for two years. Asked if a recession was imminent, Beaudry replied: “It’s certainly too early to call.”.Senator Clément Gignac (Que.), ex-chief economist for the National Bank, yesterday faulted Bank of Canada executives for giving bad advice to Canadians. “In 2020 the central banks, not only in Canada, mentioned interest rates would remain low for a while,” said Gignac. “As a result in Canada a lot of people bought houses at variable rate mortgages.”.“In 2020 the Bank of Canada mentioned, ‘You know what? Inflation will be transitory.’ Whoops,” said Gignac. “They give the impression they know a lot of things, more than us, and we start to realize they have no better clue than Wall Street economists.”.Successive Bank of Canada governors in the past two years issued a series of mistaken forecasts. Predictions subsequently proven wrong included:.• “The pandemic will have largely run its course by the middle of 2022” (Tiff Macklem, July 15, 2020);• “Interest rates are going to be low for a long time” (Macklem, July 15, 2020);• “Inflation is expected to remain less than 2% in 2023” (Macklem, November 26, 2020);• “Inflation will stay low” (Stephen Poloz, November 17, 2020);• “The inflation we’re observing right now is very likely to be transitory” (Poloz, May 18, 2021)..“My question is simple,” said Senator Gignac. “Do you think the central bank talks too much?” Replied Dodge: “I think it’s very hard to give guidance other than, ‘We’re going to watch and see what happens.’”.Dodge is a former deputy finance minister who served as Bank governor to his retirement in 2008. He is currently senior advisor with Bennett Jones LLP of Ottawa..“In August 2020 they changed their rules and basically said, ‘We’re not going to care about inflation,’” testified Dodge. “And then in August 2021 they said, ‘It’s all transitory’ – an unfortunate use of the word transitory.”.“Economists understood what they meant but in plain English it wasn’t very helpful,” said Dodge. “So I think there were big mistakes made.”
