OTTAWA (Reuters) – Canada’s red-hot labor market can weather an economic slump without seeing a major surge in unemployment, the central bank said on Thursday, ahead of another expected interest rate increase.
The Bank of Canada has lifted rates by 350 basis points since March, one of its fastest tightening cycles ever, and Governor Tiff Macklem has not ruled out another oversized hike at the next meeting on Dec. 7.
Inflation has eased to 6.9% from a peak of 8.1%, but it is still far above the central bank’s 2% target and underlying price pressures remain broad-based. The bank forecasts growth will stall through the middle of next year.
“That’s not a severe recession, but it is a significant slowing of the economy,” Macklem said in the prepared remarks of a speech to students and researchers in Toronto. Tightening monetary policy to combat inflation would push up the jobless rate, he added.
“But because the labor market is so hot and we have an exceptionally high number of vacant jobs, there is scope to cool the labor market without causing the kind of large surge in unemployment that we have typically experienced in recessions,” he said.
(Reporting by Steve Scherer, editing by David Ljunggren)
