Recession: “it's on people's minds,” said Champagne

Recession: “it’s on people’s minds,” Champagne


Although many Canadians say they expect a recession, federal ministers prefer not to get wet, but still warn that the country could be entering a more difficult phase.

A Bank of Canada (BoC) poll released on Monday reported, among other things, that almost two-thirds of Canadians estimated the probability of a recession to be between 60% and 100% during the next year.

Respondents considered wages that do not follow inflation and high prices, which reduce their ability to spend, as factors that could lead to recession.

For François-Philippe Champagne, recession, “it's definitely on people's minds”.

The Federal Minister for Innovation, Science and Industry acknowledges that it is “difficult” to put a figure on the risks of inflation, but explains that “much of inflation is generated by supply rather than demand”.

In the past six months, the Bank of Canada has raised the key rate by 300 points (3 points) to calm demand. This steep rise is intended to slow the rise in prices, but it will most certainly affect economic growth.

A further increase in the key rate is expected for October 26th. Experts expect an increase of 50 points to 4.25%. The key rate is at 3.25.

“Raising interest rates affects demand, but the problem we have is supply chain issues. That's why you saw us working hard, I would tell you, there, to bring things home,” said Mr. Champagne during a “scrum” at the entrance to the Council of ministers on Tuesday.

Deputy Premier and Minister of Finance Chrystia Freeland did not contradict him during a press conference at the offices of a green hydrogen company in Gatineau on Monday.< /p>

The word “recession” was absent from her speech, but the tone was nevertheless clear: “People are worried,” she said.
“Even if inflation recedes in the coming months, the situation will stay difficult. […] Our economy will slow down because the central bank has to tackle inflation. Many people will see their mortgage payments increase. Business will no longer be as good as it has been since deconfinement. And the unemployment rate will no longer be at a historic low,” Ms. Freeland said on Monday.

The latter, like Minister Champagne, suggested that one of the ways forward to better deal with the economic uncertainties linked to globalization was to bring production industries back to the country. Another way is that of “friendshoring”, or “amilocalisation”, i.e. the action of doing business only with countries that are clearly allies for the production or processing of certain goods.

Asked about the risks of recession, Justin Trudeau dodged the question. Instead, he spoke about the actions taken by his government to help people cope with rising prices, including the doubling of the GST credit, which is expected to pass through Parliament within the next few weeks.

Having few tools to act on inflation given its mainly global causes, the government is therefore banking on ways to reduce its impact for the public.

Minister Champagne therefore welcomed Loblaws' initiative to freeze the prices of hundreds of products and hopes “that this will encourage everyone else to follow suit”.

A meeting between him, Minister Freeland and the Retailers Association of Canada is scheduled to take place on Tuesday evening to discuss it.

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