Bank of Canada Governor Tiff Macklem said Canada's economy is currently weak but does not meet the criteria for a recession [1].
The statement comes as the central bank navigates a turbulent economic period where indicators of growth are stalling. Whether the country has entered a formal downturn remains a point of contention among analysts and officials.
During a press conference in Ottawa on April 17, 2024, Macklem addressed the current state of national economic activity [1]. He said that while the data show significant weakness, there has not been a broad-based decline in activity required to label the situation a recession [1].
"Based on the data I've seen to date, the economy is weak, but it is not clearly in recession," Macklem said [1].
Macklem pointed to the trend of core inflation, which he said has been ticking down [5]. This deceleration in inflation contributes to the bank's current assessment of the economic landscape [5]. He said further his position on the terminology of the current slump.
"Recession is not the word I would use," Macklem said [1].
Despite the observed weakness, the Bank of Canada decided to keep the policy interest rate steady at 2.25 percent [4]. This decision reflects a balancing act between controlling inflation and supporting a fragile economy.
Other reports have offered a different perspective on the timing of the downturn. Some GDP reports suggest the economy is flirting with a technical recession, though the central bank maintains its stance that the decline is not broad enough to be definitive [6].
“"The economy is weak, but it is not clearly in recession."”
The Bank of Canada's refusal to label the current period a recession suggests a cautious approach to monetary policy. By maintaining a steady interest rate and focusing on the downward trend of core inflation, the bank is attempting to avoid triggering a deeper downturn while still ensuring price stability. The gap between 'technical' recession indicators and the bank's 'broad-based' definition highlights the complexity of diagnosing economic health in real-time.
