What Rosenberg's Magic Recession Indicator Says

With the inflation roller coaster of 2021-'23 and its savage rate hike cycle still fresh in our memories, millions of Canadians dread the thought of re-inflation.
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They worry that the BoC will yell "Psych!" — and that rate cuts will boomerang back as hikes, punishing them for choosing a variable mortgage. For families on the budgetary edge, that broken promise of cuts would feel kind of like being sucker-punched by a loan shark.

Fortunately, that doesn't seem too likely at this point. The Bank of Canada, in its public messaging, is clearly more worried about disinflation than the opposite.

The country is suffering from "excess supply," says Governor Tiff Macklem. He's concerned about inflation falling too much, too fast, as that could coincide with more backbreaking job losses.

To prevent that, the Bank is inclined to keep trimming rates.

As for how aggressive it will be and for how long, even the BoC's crystal ball is cloudy on those points.

It's all riding on if—or how quickly—our economy turns into a dumpster fire. Aside from high inflation, the last thing the Bank of Canada wants is to keep monetary policy too tight and run into negative growth.

But how do you measure the risk of face-planting into a recession?