If the Bank of Canada is forced to raise its benchmark interest rate as high as 3.5 per cent to slow consumer price growth, the economy would be thrown into reverse for two straight quarters starting around the end of this year, a situation commonly referred to as a technical recession, according to a blog post by Bob Dugan, the Canada Mortgage and Housing Corp.’s chief economist.
That scenario would result in Canada’s national average home price declining 5 per cent from its early 2022 peak by the middle of next year, Dugan estimated. Home sales would likely fall by 34 per cent, according to the model. The recession outcome is derived from the more dire of two models created by the CMHC to explore the impact of higher interest rates on the Canadian economy. The other scenario assumed the central bank would only have to raise its interest rate to 2.5 per cent to rein in inflation, a model that ultimately concluded economic growth would continue, albeit at a slower pace, according to the post.
Inflation running at a four-decade high has caused the Bank of Canada to embark on an aggressive campaign to hike borrowing costs, raising its benchmark rate to 1.5 per cent from 0.25 per cent just four months ago, with even bolder action expected this week. The market is betting the benchmark will jump three quarters of a percentage point at the central bank’s Wednesday meeting alone, reaching 2.25 per cent, and then hit 3.
Dugan characterized the recession in a higher-rate scenario as “mild.” The less-aggressive model would result in a 3 per cent decline in average home prices, according to the post. Home sales under that scenario would likely fall by 29 per cent.
'Shecession'
Why don't we just tear the ban aid off. Raise base 3 to 4 points let the housing market crash. The strong will survive and we hope the govt is never this stupid again to build fake wealth.
Realestate workers who been charging 6% will then be looking for assistance!🙄
This is what happens when people and a country build artificial wealth with money they don't have.
A mild recession way better than a major crash
Lots did - especially in TO/Van
That’s a certainty, especially for anyone that bought an overpriced house during the last 5-10 yrs
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