Bank of Canada Rejects Recession Label for Economy's Weakness
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Author of the article:You can save this article by registering for freehere. Orsign-inif you have an account. r1[0gfn)ezj6wmp{px6r}kqi_media_dl_1. pngStatistics Canada(Bloomberg) — Bank of Canada officials rejected the notion that the country’s economy is in recession as they set borrowing costs earlier this month, though they acknowledged weak growth and labor market slack. Subscribe now to read the latest news in your city and across Canada. Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others. Daily content from Financial Times, the world's leading global business publication. Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account. National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on. Daily puzzles, including the New York Times Crossword. Subscribe now to read the latest news in your city and across Canada. 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Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorReal gross domestic product fell by 0. 1% on an annualized basis during the first three months of the year, after a 1% decline in the fourth quarter. But the back-to-back contractions weren’t sufficient evidence for the central bank’s policymakers to declare a full downturn. “Members agreed a recession is characterized by a deep, widespread and persistent decline in aggregate economic activity,” officials said in a summary of deliberations from their June 10 decision. “The economy was weak; it was still operating in excess supply and there was slack in the labor market. But the economy was not clearly in recession,” they said. Get the latest headlines, breaking news and columns. By signing up you consent to receive the above newsletter from Postmedia Network Inc. A welcome email is on its way. If you don't see it, please check your junk folder. The next issue of Top Stories will soon be in your inbox. We encountered an issue signing you up. Please try againThe comments match the general consensus of economists and analysts who have suggested it’s premature to characterize sluggish economic activity as recession just yet. Earlier this month, the C. D. Howe Institute, an arbiter of business cycle dates, argued similarly, saying it’s “too early to conclude. ”Speaking to lawmakers earlier this month, Senior Deputy Governor Carolyn Rogers warned against putting too much weight on two quarterly contractions in economic activity. Prime Minister Mark Carney chalked the slowdown up to the country’s slashed immigration targets, while opposition Conservative Leader Pierre Poilievre maintains the country is in a “full-blown recession. ”The central bank said a major reason for the surprise contraction in the first quarter was a major drop in spending on weapons systems. Officials noted that consumer spending rose, and the bank sees economic growth resuming in the second quarter of this year. Policymakers held the policy rate at 2. 25% earlier this month, arguing they faced a “dilemma” and said they’re limited in their ability to adjust rates in a way that both supports economic growth and prevents higher oil prices from feeding into broader price pressures. In the minutes-like-summary, central bankers expanded their thinking on the matter, and suggested the path for borrowing costs was highly dependent on energy prices. “If the bank were to raise rates to combat higher inflation and oil prices came back down quickly, by the time higher interest rates were affecting the economy, they would not be needed,” officials said. At the same time, they said, “if higher oil prices persisted and spread, and the bank held the policy rate for too long, the eventual monetary policy response would have to be more aggressive than if it had acted earlier. ”On Tuesday, Governor Tiff Macklem said the interim peace deal between the US and Iran and the subsequent decrease in oil prices has removed some upside risk for inflation in Canada, calling it “very welcome news. ”Inflation OutlookThough the bank’s governing council acknowledged higher energy prices were pushing inflation higher, they viewed price pressures as “generally contained” and saw “limited evidence of pass-through” to other goods and services. Officials also said their so-called preferred measures of core inflation were hovering close to the central bank’s 2% target, and flagged a narrowing breadth of price pressures rising quicker than a 3% yearly pace. They also saw medium- and long-run expectations “well-anchored. ”Join the ConversationThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more aboutcookies here. By continuing to use our site, you agree to ourTerms of UseandPrivacy Policy.