Hello everyone, for those of you who were able to join our live event we hope you found the presentation informative. For those unable to join (or busy watching the Jays game) We have provided a brief summary below. 

 

• Inflation eventually will come down to 2%. Why? Because the Bank of Canada must uphold the reputation they've established as inflation fighters. We must remember that given two options at any point in time, a recession versus inflation, they will choose a recession. Therefore, they are going to overshoot on raising interest rates to ensure price stability.

 

• Inflation is a lagging indicator, but the central bank won’t stop raising interest rates while inflation is still elevated. This is why he believes that they are in the process of overshooting this hiking cycle by design.

 

• In 2022 the probability of a recession was 96%, but most never felt the impact. Even though real GDP per capita was down 3% year over year we didn’t feel the effects of a usual recession because of the 1.2 million people who arrived in Canada last year who kept demand for goods and services high.  

 

• So why haven’t we felt the damage from the increase in rates yet? The answer is the consumer. During the pandemic, we collectively saved $160 billion which was sitting on the sideline. Deposits went up dramatically. But times have changed. People are now spending more on their credit cards as their savings have decreased. This makes the Bank of Canada more powerful as the consumer is more exposed to higher rates.

 

• Looking ahead to the next Bank of Canada meeting, central bankers will be looking for unemployment data to advise their next decision. If unemployment remains relatively stable and low, they are more likely to raise rates.

 

• Regardless of the move, we know that we are at or remarkably close to the end of this tightening cycle. He believes that we will not be seeing rate cuts until at least mid-2024 or until we can be sure that inflation is dead in its tracks.