Bank of Canada's Governor Tiff Macklem said on Wednesday that the economy in 2024 might be worse than predicted.According to Blacklock’s Reporter, Macklem stated six weeks ago there would not be a recession. Now, he says it's a possibility.“The data we have been receiving is showing that slowing,” Macklem told reporters. “In fact, the economy has slowed a little more than we were predicting.”“We expected a slowing,” said Macklem. “We’re seeing a little more slowing. It’s hard to be super precise why it slowed a little more.”“Does that imply you are expecting a recession?” asked a reporter. “We are expecting growth below one percent for the next three, four quarters,” replied Macklem. “Is that a recession? No, it’s not a recession. It is low positive growth. Having said that, if you are predicting low positive growth, you can’t rule out that we’re going to get small negative numbers. There could certainly be two or three small negative quarters” – a recession.On Wednesday, the Bank kept its interest rate at five percent, the highest since April 17, 2001. The next rate announcement is December 6.In a Monetary Policy Report, the Bank predicted growth, at best, will average 0.9% next year, “well below expectations.” Household spending was “weaker than anticipated” and “the outlook for GDP over 2024 has been revised down,” it said.“Households are cutting back on their spending, delaying purchases and shifting their savings to higher rate accounts in response to the ongoing effects of higher interest rates and the rising cost of living,” said the Policy Report. “Income growth is also projected to slow.”“Business investment is expected to remain weak for the rest of 2023 before picking up gradually in 2024,” said the report. “Investment is being held back by elevated borrowing costs.”Macklem acknowledged the Bank’s incorrect forecasting. “It is true in this forecast we have revised down our growth forecast and revised up our inflation forecast in the near term,” he said. The economy should recover by 2025, added Macklem.“Has Canada entered a period of stagflation?” asked a reporter. “It’s not a word I would use,” replied Macklem. “I grew up in the 1970s. Stagflation, to me, is a period of high inflation and high unemployment. That is not what we are in now. Yes, inflation is well above our target. It’s too high, but it’s not high like it was in the 1970s. And the unemployment rate actually is quite low.”From 1974 to 1978, Canada experienced stagflation. The economy grew by an average of 3.3% annually, while the benchmark Consumer Price Index rose by 9.2% annually.It was “the coincidence of historically low rates of economic growth with historically high rates of price inflation,” the Economic Council of Canada wrote in a 1980 report Wage Structure and Stagflation in the 1970s.
Bank of Canada's Governor Tiff Macklem said on Wednesday that the economy in 2024 might be worse than predicted.According to Blacklock’s Reporter, Macklem stated six weeks ago there would not be a recession. Now, he says it's a possibility.“The data we have been receiving is showing that slowing,” Macklem told reporters. “In fact, the economy has slowed a little more than we were predicting.”“We expected a slowing,” said Macklem. “We’re seeing a little more slowing. It’s hard to be super precise why it slowed a little more.”“Does that imply you are expecting a recession?” asked a reporter. “We are expecting growth below one percent for the next three, four quarters,” replied Macklem. “Is that a recession? No, it’s not a recession. It is low positive growth. Having said that, if you are predicting low positive growth, you can’t rule out that we’re going to get small negative numbers. There could certainly be two or three small negative quarters” – a recession.On Wednesday, the Bank kept its interest rate at five percent, the highest since April 17, 2001. The next rate announcement is December 6.In a Monetary Policy Report, the Bank predicted growth, at best, will average 0.9% next year, “well below expectations.” Household spending was “weaker than anticipated” and “the outlook for GDP over 2024 has been revised down,” it said.“Households are cutting back on their spending, delaying purchases and shifting their savings to higher rate accounts in response to the ongoing effects of higher interest rates and the rising cost of living,” said the Policy Report. “Income growth is also projected to slow.”“Business investment is expected to remain weak for the rest of 2023 before picking up gradually in 2024,” said the report. “Investment is being held back by elevated borrowing costs.”Macklem acknowledged the Bank’s incorrect forecasting. “It is true in this forecast we have revised down our growth forecast and revised up our inflation forecast in the near term,” he said. The economy should recover by 2025, added Macklem.“Has Canada entered a period of stagflation?” asked a reporter. “It’s not a word I would use,” replied Macklem. “I grew up in the 1970s. Stagflation, to me, is a period of high inflation and high unemployment. That is not what we are in now. Yes, inflation is well above our target. It’s too high, but it’s not high like it was in the 1970s. And the unemployment rate actually is quite low.”From 1974 to 1978, Canada experienced stagflation. The economy grew by an average of 3.3% annually, while the benchmark Consumer Price Index rose by 9.2% annually.It was “the coincidence of historically low rates of economic growth with historically high rates of price inflation,” the Economic Council of Canada wrote in a 1980 report Wage Structure and Stagflation in the 1970s.
