BMO calls U.S., Canada recession in 2023

By James Langton | September 23, 2022 | Last updated on September 23, 2022
2 min read
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The odds have now tipped in favour of a recession for North America, says BMO Capital Markets.

In a new report, the bank’s economists say that the risk of a recession in the coming year “has now climbed above 50%.” BMO has revised its forecasts to anticipate a “moderate downturn” in the first half of 2023 for both Canada and the U.S.

“We previously had one negative quarter built in, signalling the relatively high downside risks to the economy from soaring inflation and the need for aggressive rate hikes. Those risks have simply been amped up by the persistence of underlying inflation — particularly in the U.S. — and by the rising possibility of a monetary overshoot,” it said.

At the same time, surging geopolitical risks are “adding an unwanted ingredient to the noxious mix,” the report noted.

“Financial markets are now fully absorbing the Fed’s harsh message that there will be no retreat from the inflation fight,” it said.

Indeed, BMO said that it now expects another 75-basis-point rate hike from the Fed in November, followed by 50 bps in December, and 25 bps at its first meeting in 2023, pushing rates to the range of 4.50% to 4.75%, where they’re expected to stay throughout 2023.

“The only other periods when the Fed has hiked rates that rapidly in the post-war era were in 1973, 1980, and 1981, and all three episodes ended in recession,” BMO said.

This intensified weakness is expected to spill over to Canada too, where BMO now sees a GDP decline in the first half of 2023 — despite only raising its forecast for Bank of Canada rate hikes by 25 bps, versus the 75-bps increase in its Fed forecast.

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James Langton

James is a senior reporter for and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.