As the Bank of Canada rushes to neutral, recession bets rise

Canada’s central bank has signaled plans to race ahead with a series of oversized hikes to curb inflation, upping the risk of plunging the economy into a recession, say, economists, though worth it if it keeps rapid price rises from becoming entrenched.

The Bank of Canada last week raised its policy interest rate to 1.5% from 1.0%, its second consecutive 50-basis-point hike.
It said it was ready to act “more forcefully” if needed to fend off “galloping inflation,” already at a 31-year high.

The housing market, a key driver of Canada’s economy, has cooled sharply from February’s peak, as rate hikes cut into buying power.
Bank of Canada’s Beaudry: If you do a little bit too little and you allow inflation to keep going.
If you do too much, you might kind of bring the economy into a recession.

Money markets are betting the Bank of Canada will raise its policy rate to 3.25% by the end of this year.
The Bank may be willing to risk a hard landing if it keeps consumer expectations in hand, economists said.

This report’s information was first seen on Reuters; to read more, click this link.