BMO Capital Markets head fears deep recession on rate hikes
BNN Bloomberg
Two of Canada’s top investment bankers voiced concern that the rising interest rates that have already dragged down asset values from stocks to cryptocurrencies could plunge the global economy into a recession.
Dan Barclay, chief executive officer of capital markets at the Bank of Montreal, said interest rate hikes by central banks around the world could fail to arrest recent spikes in consumer prices because they are rooted in post-pandemic supply chain snarls and Russia’s invasion of Ukraine. But they could still wallop economic growth.
“I’m hoping you’ll have a nice correction, we will take some of the froth out of a bunch of markets and we’ll have a nice soft landing,” he said at the Bloomberg Canada Capital Markets Forum in Toronto. “That would be my hope story. My fear story is that they raise rates really, really hard, they can’t fix demand, because it’s a supply problem and not demand, and we will have a very deep recession.”
Central banks around the world are embarking on an unusually aggressive campaign of interest rate increases -- both the US Federal Reserve and the Bank of Canada raised rates by 50 basis points recently, twice their normal pace -- to try to wrestle inflation down from multi-decade highs.
