Canada is heading for a moderate recession, but Royal Bank of Canada economists expect the recession to be short-lived compared to the previous recession.
The Bank of Canada is aggressively raising key night rates this year to combat inflation, which surged to 7.7% in May. This is the fastest rise in nearly 40 years and far exceeds economists' expectations.
With the central bank maintaining its 2% target, more aggressive moves are expected from this month onwards to lower inflation by 5.7%. Economists forecast an increase of 75 basis points in July, reflecting the move of the Federal Reserve Board in June, with an additional 50 basis points increase in September,Reuters. Polls suggest.
A strong strategy has raised concerns that Canada is heading into recession, in step with the Federal Reserve Board. Due to high borrowing costs, Canadian households are particularly in debt. Experts say the low-income group is most exposed to the double risk of inflation and rising interest rates.
According to economists, much of the inflationary pressure comes from outside Canada, with Russia's invasion of Ukraine, and energy and food prices soaring against the backdrop of supply chain bottlenecks.
"But historic labor pressures, rising food and energy prices, and rising interest rates are imminent. These pressures will drive the economy into a gradual contraction in 2023. It's possible ... Still, by historical standards, slow down and be modest. "
Janzen and Fan recover from active activity and rising product prices within the travel and hospitality sector. He said he was boosting, but said the shortage of workers was hindering business expansion. They said there were 70% more jobs last month compared to the same period before the pandemic, but employers were competing for almost 9% less workers in the employment market.
"The soaring prices are reducing the purchasing power of Canadians in pumps and grocery stores," they said.
"As the recession progresses next year, the [unemployment rate] rate could rise another 1.5 percentage points to 6.6 percent. These unemployments have already made Canadians low-income households. It happens when we're working on higher prices and debt repayment costs, which are the biggest blows. ”
Meanwhile, the Canadian Center for Policy Alternatives (CCPA) announced on Tuesday {23. } Reported that in the last 60 years, the Bank of Canada has tripled its inflation rate by 5.7. Percentages and recessions continued through the rapid and aggressive rise in interest rates. However, economists at RBC and elsewhere say that central banks have few options available to deal with inflation.
"Banks of Canada currently have little choice but to act," writes Jazen and Fan.
"Inflation is too long and is starting to sneak up on long-term business and consumer expectations. Higher inflation expectations can be self-fulfilling and companies cost Consumers are more willing to pay for them as they are more likely to pass on the increase in prize.
Despite these concerns, RBC believes the recession is not as serious as the previous recession.
"Global inflationary pressures may peak soon," economists predict.
"Prices are still rising rapidly and inflation will not slow down continuously until demand declines, but if that happens, central banks will ease interest rates again ... I don't think it will take much time to eliminate that weakness after 2024. "
Graphic data journalist Deena Zaidi
