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Study Suggests Bank of Canada's Rapid Rate Hikes Could Cause a Recession

Tuesday, 5 July 2022 at 12:34

By Linda Morgan

Study says rapidly increasing key interest rates will likely bring on a recession.

A new study suggests Canada could be heading towards a recession. 

The study, which was conducted by the Canadian Centre for Policy Alternatives, indicates the bank's approach to bring inflation down is causing significant "collateral damage."

The research institute says if the bank is looking to bring inflation down from 7.7 percent to its two percent target by quickly raising rates, about 850,000 jobs could be lost. 

It also notes the bank has had no success with this method. 

During the past 60 years, a 5.7 percent drop in inflation has occurred three times after big hike rates, triggering a recession in each instance. 

The CCPA recommends adjusting the target inflation rate to four percent instead. 

This comes one day after the bank released a pair of quarterly surveys showing consumers and businesses expect high inflation rates for years to come. 

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