RBC CEO Dave McKay said Canada will enter a 'modest recession' but he thinks it could be dampened by strong consumer demand and high levels of liquidity in the market. Click the link for the full interview.
McKay said in an exclusive interview with BNN Bloomberg Tuesday that an interest rate-induced “orderly slowing” is taking place in Canada’s economy. This slowing stems from the Bank of Canada’s rate hiking campaign to bring inflation down and bring about a soft landing, he said. As the potential end of the central bank's rate increases is expected to near, McKay believes inflation has peaked.
“With that slower spending, you're seeing [prices in] the Canadian housing market come off roughly 14 [per cent to] 15 per cent, as [was] our expectation. Demand is off almost 40 per cent of housing activity,” McKay said. McKay said job losses are expected to occur in Canada’s economy with the unemployment rate expected to hit around six to seven per cent. Statistics Canada recently said Canada’s jobless rate was 5.0 per cent in December.
However, an increase in unemployment could be partly absorbed by the “enormous liquidity” that exists in the market, McKay noted. “That liquidity can be used to spend and help the economy recover. [It is an] unprecedented amount of liquidity, almost 20 per cent of gross domestic product. So, when you think about that latent spending power, it's [a] very significant stimulus for recovery.” If the Bank of Canada hiked rates sooner than March 2022, McKay said the impact on consumers might have been avoided.
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