A winter recession will not be severe, Bank of Canada Governor Tiff Macklem told the Senate banking committee last night. Macklem also acknowledged his earlier economic forecasts were incorrect..“It’s not a severe recession. It’s not a major contraction, but you could certainly get a couple of quarters of negative growth," said Macklem. .Senator Pierre Ringuette (N.B.) asked Macklem what the economic modelling is saying, and what the maximum interest rates should be. “We have models,” replied Macklem. “We use models. We need to be forward looking.”.“Growth for the next three quarters is roughly zero,” said Macklem, adding: “I am not going to give you a number because we take these decisions each time as we move forward.”.According to Blacklock's Reporter, Macklem last Wednesday raised the benchmark overnight interest rate on interbank loans a half point to 3.75%. It was the sixth rate increase this year. A seventh hike is due on Dec. 7..“Did we wait too long?” Macklem said last night. “It is fair to say that if a year ago we knew everything we know today, yes, I think we probably would have started to raise interest rates.”.“It’s not like we got everything right,” said Macklem, adding: “Inflation definitely came up faster than we thought and we acted forcefully to get it back down. It’s going to take some time to work but I do believe we’re going to get there.”.“We have seen some danger signs in the economy,” said Macklem. “The danger sign we’ve seen is that companies very rapidly passed through higher prices to consumers, and as consumers kind of get used to high inflation they accept those so that companies when they raise prices, they're not worrying about what their competitors are going to do.”.Macklem said Canada needs to get back to a situation where "companies are more worried they are going to lose their customers if they raise their prices.".“But when you’ve got an economy in excess demand, if you’re a company and you can deliver the product, then it’s just easier to pass through those prices," he said..Senator Hassan Yussuff (ON), a former Canadian Labour Congress president, said economic conditions were obvious to consumers. “You talk to anybody on Main Street and they’re not confused about what’s going on,” said Yussuff. “They go to the grocery store and they’re asking themselves some pretty fundamental questions.”.“Inflation is not an issue if you’re making $200,000,” said Yussuff. “The people who are living paycheque to paycheque who are having to deal with it, the rent increase, the list goes on, are the people who are facing the harshest reality right now.”.The Bank of Canada, in an Oct. 26 Monetary Policy Report, said overall inflation would remain high, “about 4%,” to the end of 2023..“Elevated food inflation is widespread,” more than 11%, it said.
