The Globe and Mail reports in its Wednesday, Sept. 21, edition that the Bank of Canada is pushing back against the idea it will need to cause a recession to get prices under control. The Globe's Mark Rendell writes that deputy governor Paul Beaudry on Tuesday challenged the idea that returning inflation to the bank's 2-per-cent target will necessarily entail a sustained economic contraction. The trajectory of inflation depends to a significant degree on what individuals and businesses believe about future inflation, he argued. If people's expectations for future inflation remain well anchored, it "greatly reduces the need to engineer a period of significant economic slack to get back to target on a sustainable basis," he said. Inflation was "headed in the right direction," he said, but remained "too high." His comments land in the middle of a debate about whether Canada is heading toward a recession. The aggressive pace of rate hikes is already hitting the economy hard, leading to a sharp decline in housing market activity and a pullback in consumer spending. A growing number of private-sector forecasters, including economists at RBC
and Desjardins, now expect the Canadian economy to fall into recession next year.
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