For the sixth time since March, the Bank of Canada (BoC) has hiked its benchmark interest rate in an effort to combat the inflation crisis – to 3.75% from 3.25%.
In its latest Monetary Policy Report, the central bank is echoing the warnings of many economists that a recession is possible in the first half of 2023.
“GDP growth is then projected to slow to between 0 per cent and 0.5 per cent through the end of 2022 and the first half of 2023,” reads the report.
“This suggests that a couple of quarters with growth slightly below zero is just as likely as a couple of quarters with small positive growth.”
The BoC predicts inflation will eventually decline and hit its 2% target by 2024. Last week, Canada’s inflation rate declined slightly to 6.9%, but the price of food continued to increase.
StatsCan revealed that “in September, prices for food purchased from stores (+11.4%) grew at the fastest pace year-over-year since August 1981 (+11.9%).” This means the ongoing rise in food prices has hit a 40 year high.
Several economists have warned that the Canadian economy faces an imminent recession.
Prior to the BoC’s admission that a recession is likely in 2023, economists from Desjardins Group and the Royal Bank of Canada warned Canadians to brace for further economic woes.
“Our view is that we’re going to see a continued slowing of sales activity in Canada, and continued weakness on the price side going forward,” said Desjardins Group economist Randall Bartlett.
The BoC’s next rate announcement is scheduled to take place on December 7.