'No one should be hyperventilating, recession is part of the business cycle': David Rosenberg
A prominent economist said he’s still predicting a recession in Canada this year, but that shouldn’t be a source of panic.
“I don't think anybody should really be hyperventilating,” David Rosenberg told BNN Bloomberg in a television interview on Thursday. “The recession is part of the business cycle.”
He made the comments a day after the Bank of Canada announced it would hold its key interest rate at 4.5 per cent for a second consecutive time in its continued bid to bring down inflation.
Rosenberg said he sees an “implicit projection” for a recession in the Bank of Canada’s “close to flat” GDP projections for the year, which he said speak to “extremely weak economic growth.”
Labour data are lagging economic indicators, Rosenberg said, with strong employment numbers often preceding a recession. He said recessions typically follow periods of expansion, and people should be prepared.
“Thankfully, expansions are long and strong. Typically recessions are two or three-quarter affairs,” he said. “Let's just be prepared for a few quarters of a rough economic ride.”
Bank of Canada Governor Tiff Macklem on Wednesday pushed back on market bets for potential rate cuts ahead. Rosenberg said Macklem’s response was not unexpected, but he’s still predicting the central bank will “be forced to cut interest rates” in several months as economic conditions change.
“The question isn't what the Bank of Canada is saying right now,” he said. I think what's probably more appropriate for the investors is … what will they be saying three or six months from now.”
Rosenberg also said he thinks the Bank of Canada will be “content” to get to three per cent inflation before it starts to cut rates, despite its stated goal of two per cent.