As the Bank of Canada continues to hike interest rates, the country’s housing agency sees the chance of a recession growing the higher rates go.
The Canada Mortgage and Housing Corporation (CMHC) put out a report this week suggesting the likelihood of a two-quarter recession should the Bank of Canada take its overnight target rate to 3.5%, which CMHC considered a “high interest rate scenario.”
The Bank’s key policy rate currently sits at 1.50%.
“In this scenario, the Bank of Canada hikes more aggressively and increases its policy interest rate to 3.5% in early 2023 before gradually converging back to the neutral rate of 2.5%,” wrote CMHC’s chief economist Bob Dugan.
He added that, in this scenario, GDP would grow by 3.4% in 2022 and 0.7% in 2023, with economic growth hitting a bottom in Q4 2022 and Q1 2023.