Canada may be turning corner on inflation, but Bank of Canada governor not ruling out 'mild recession'

Governor of the Bank of Canada Tiff Macklem says he thinks Canada is 'turning the corner' on inflation, but he isn't ruling out that the country could enter a 'mild recession.' In an English-language broadcast exclusive interview with CTV National News Ottawa Bureau Chief Joyce Napier, Macklem encouraged Canadians to prepare a 'buffer' to withstand 'tougher times.'

Governor of the Bank of Canada Tiff Macklem says he thinks Canada is "turning the corner" on inflation, but he isn't ruling out that the country could enter a "mild recession."

"Our own forecast has growth slowing. It is going to feel painful," Macklem said in an English-language broadcast exclusive interview with CTV National News Ottawa Bureau Chief Joyce Napier on Wednesday.

"We're not predicting a recession, we're predicting roughly zero growth for the next two or three quarters. But, look with roughly zero growth, we could get two or three quarters of slightly negative growth. So we can't rule out a mild recession."

Macklem said that while the Bank isn't predicting a "major contraction" that would result in large increases in unemployment, he's encouraging Canadians to "try to accumulate their buffers" to ensure they can withstand "tougher times."

His remarks come on the heels of announcing the Bank's eight consecutive rate hike since March 2022— raising its overnight rate by 25 basis points, moving its policy rate to 4.5 per cent from 4.25 per cent—in an effort to tamp down inflation. 

With Wednesday's announcement, Macklem also signalled a pause at its current rate, while it assesses the full impact of its hikes on the economy.

In the interview, Macklem said that he thinks the Bank has now "done enough" and isn't planning to raise rates further, however if the economy doesn’t evolve as Canada's central bank is currently forecasting—three per cent inflation by mid-2023— it may need to raise rates again.