Oxford Economics Predicts Canada’s Recession, Foresees Sharp Economic Downturn to Quell Inflation

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Oxford Economics, a prominent macroresearch firm, has recently released a research brief indicating that Canada’s economy has already entered a recession, diverging from previous expectations. According to their analysis, the third quarter GDP showed a decline, marking the start of the recession. This stands in contrast to the Bank of Canada’s more optimistic projections.

The firm anticipates a moderate recession in Canada, which they believe will help ease inflationary pressures and align CPI inflation back to the 2% target by late 2024. This forecast is quicker than other predictions, primarily because they envisage a hard landing for the economy, which would cool inflation faster.

The Bank of Canada, on the other hand, predicts a softer economic landing and expects CPI inflation to return to the target by the end of 2025. The difference in these forecasts underscores the uncertainty and varying opinions about the trajectory of Canada’s economy.

The potential impact of the recession on interest rates is another area of focus. Oxford Economics suggests that further hikes in the overnight rate by the Bank of Canada may not be necessary. They predict that the central bank will maintain the policy rate at 5% until June, then gradually reduce it to 4.25% by the end of 2024. However, in a soft-landing scenario, the Bank of Canada might need to increase the policy rate.

These economic forecasts have significant implications for various sectors, including real estate. The trajectory of inflation and interest rates is closely watched by analysts and investors, as these factors influence the housing market and broader economic conditions.

The analysis by Oxford Economics provides a critical perspective on Canada’s economic situation, offering valuable insights for those monitoring the real estate market and the economy at large.

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