CMHC sees chance of a recession by end of year as rates rise
BNN Bloomberg
Canada’s national housing agency sees a chance the country will enter a recession by the end of the year as the central bank hikes interest rates to control inflation.
If the Bank of Canada is forced to raise its benchmark interest rate as high as 3.5 per cent to slow consumer price growth, the economy would be thrown into reverse for two straight quarters starting around the end of this year, a situation commonly referred to as a technical recession, according to a blog post by Bob Dugan, the Canada Mortgage and Housing Corp.’s chief economist.
That scenario would result in Canada’s national average home price declining 5 per cent from its early 2022 peak by the middle of next year, Dugan estimated. Home sales would likely fall by 34 per cent, according to the model.
The recession outcome is derived from the more dire of two models created by the CMHC to explore the impact of higher interest rates on the Canadian economy. The other scenario assumed the central bank would only have to raise its interest rate to 2.5 per cent to rein in inflation, a model that ultimately concluded economic growth would continue, albeit at a slower pace, according to the post.
