Another rate hike by the Bank of Canada this week risks pushing the Canadian economy into a deep recession that could cost hundreds of thousands of people their jobs, a growing number of economists fear.
The bank will announce Wednesday morning whether it will raise its key overnight lending rate for the eighth straight time, and markets are already discounting a 25 basis point (one-quarter percentage point) increase.
That increase, said economist Jim Stanford, would be a serious mistake for one simple reason: the economy has yet to feel the full impact of the seven rate hikes in 2022 and is already struggling.
If there is a mild "technical" recession (two consecutive quarters of declining GDP), there may not be many jobs lost. But a deeper recession could mean 300,000 people losing their jobs and the unemployment rate reaching nine percent, said Stanford, chief economist at the Center for Future Work.
At National Bank Financial, economists Matthieu Arseneau and Taylor Schleich said the Bank of Canada has already hit housing prices and also caused a big drop in consumer confidence and business spending.
"Those who argue that another 25 basis point increase won't kill the economy forget that, at this stage of the economic cycle, the impact of further increases is not linear. In other words, the marginal increase could be the straw that breaks the camel's back," Arseneau and Schleich wrote.
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