Why Canada is likely entering a recession, or already in one: expert

Canada's annual inflation rate rose to 3.3 per cent in July, but one economics professor says last month's lower inflation number was likely an "illusion," and thinks that the country may be about to enter a recession.

"More than what was expected," Moshe Lander, an economics professor at Concordia University, told CTV News Channel on Tuesday, "it's bad news for Canadians."

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IS CANADA AT RISK OF A RECESSION?

Lander warned that Canada is likely "entering a recession, if we're not already inside one" and predicted that by September the country will see gross domestic product start to slow --- part of which is a result of consistent interest rate hikes.

"The reality is that the interest rate increases last year are having their effect."

Lander says that desired effect has been to take some of the "demand out of the economy," which is why inflation has dropped from "above eight per cent" last year to July's 3.3 per cent.

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WHY HAS INFLATION RISEN AGAIN?

Lander says the drop in inflation seen in July was likely "a bit of an illusion" that was a result of gas prices falling, so as those prices start rising, or "not falling as much," it's putting new pressures on the price level of goods and services.

"The usual culprits of supply chain issues, fast-rising grocery prices and disruptions continue to play a role."

ARE MORE RATE HIKES COMING?

Higher interest rates have fed into higher mortgage costs, which Statistics Canada says is one of the largest contributor to inflation.

• Here's how the last BoC rate hike affected home sales in different markets

However, Lander says, it was inevitable that interest rates would rise after years of "record lows," and the result is an "illusion" that mortgage debt is contributing to inflation.

"It had to happen eventually, I think it's surprised Canadians just how fast… it's changed, though."

Click the video at the top of this article for the full interview, including if Lander's thoughts on the Bank of Canada's next interest rate decision.