This segment will also be the most affected by the looming recession, BoC governor says
One particular demographic is currently the most affected by elevated inflation levels, and this sector will also likely bear the brunt of the possible recession next year, according to Bank of Canada governor Tiff Macklem.
“High inflation affects everyone, but lower-income households feel the burden of high inflation the most,” Macklem said. “Lower-income Canadians will also be disproportionately affected by the slowdown.”
However, sustained strength in the labour market will help offset this imbalance.
“We don’t expect a large increase in unemployment in the way we’ve seen in past recessions,” Macklem said. “We’re not expecting high unemployment by historical standards.”
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The comparatively fast recovery of the jobs market has also proven to be a boon for low-income Canadians, youth, and women, Macklem said.
“We are still learning about the longer-term effects of the pandemic, but the scarring we were worried about wasn’t as pervasive as we had feared,” the governor added. “Economic growth came roaring back quickly, and workers did not remain on the sidelines for long.”
Macklem said that the central bank is expecting another outsized hike in its December 7 rate announcement, although it could also as easily shift back to a more reserved pace.
“We indicated that we expect interest rates do have further to go, and I think that could be another bigger-than-normal step or it could be reverting to more normal 25-basis-point steps,” Macklem said. “We’ll see.”
