The Canadian economy is on fire but fears of a recession remain. Statistics Canada announced that the unemployment rate fell to its lowest point ever in June to 4.9%. On top of that, some economists believe the Canadian economy is growing at more than four percent.
With the Canadian economy running so hot it is expected that the Bank of Canada will raise its key lending rate on July 13th by 75 basis points to 2.25% from 1.5%. This will be the fourth interest rate hike so far this year.
Central banks only raise interest rates when economies are doing well and believe people will be able to absorb the rate hikes. But with inflation soaring and the cost of borrowing rising fast, many Canadians believe the Bank of Canada will send the economy into a recession.
Is Canada Headed for a Recession?
According to a recent survey the majority (68%) of Canadians believe the country is headed towards a recession with 56% saying the central bank’s interest rate hikes will not prevent a recession. In fact, 17% of Canadians believe we’re already in a recession.
These concerns are fuelled by soaring gas and food prices, with inflation causing a majority of Canadians (56%) to significantly cut back on how much they spend on food, entertainment, clothing, gas, and their vehicle use.
Concerns about finances has sent consumer confidence to an 18-month low—back to where it was during the depths of the pandemic. Canadians are less confident about job prospects, wage growth and are holding off purchasing large ticket items.
Amidst this backdrop, rising interest rate hikes are dampening consumer spending which could ignite a recession.
Part of the issue stems from central banks from around the world, including the Bank of Canada and U.S. Federal Reserve, erroneously believing high inflation was simply “transitory.” Failing to see inflation for what it was and act sooner with modest interest rate hikes has undermined the pandemic recovery and also confidence in central banks and their ability to manage economic fluctuations.
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The Canadian economy is running hot and unemployment is at record lows, but surging inflation and rising interest rates are fuelling uncertainty and fears the Bank of Canada will tip the economy into a recession. Many Canadians are already spending as if we are in a recession.
Despite these headwinds, the trading experts at Learn-To-Trade.com can teach investors how to take advantage of this uncertainty and profit no matter what’s happening on Bay Street or Wall Street.
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