North America's risk of descending into a recession climbs above 50%

There’s a high chance that North America could descend into a recession over the next year.

According to a recent report from BMO, the risk of a North American recession has increased to over 50%.

“Accordingly, we are adjusting our forecast to reflect a moderate downturn in the first half of 2023 in both the US and Canadian economies,” wrote BMO chief economist Douglas Porter.

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Porter says this risk has been amped up by the persistence of inflation — particularly in the US.

In Canada, overall inflation may have eased to 7% in August, but food prices continue to soar.

Porter adds that geopolitical concerns like Russia’s war on Ukraine are “adding an unwanted ingredient to the noxious mix.”

“Financial markets are now fully absorbing the Fed’s harsh message that there will be no retreat from the inflation fight,” he explained. “The steep back-up in global rates further bludgeoned stocks, resource prices, and commodity currencies this week given mounting recession odds.”

Because of this, Porter expects interest rate hikes to keep on coming.

BMO anticipates the Bank of Canada’s key interest rate will peak between 4.5% to 4.75% in 2023.

This matches a similar forecast made by the Organisation for Economic Co-operation and Development (OECD) in its own report.

The central bank already increased its key interest rate for the fifth time this year earlier this month, so it’s well on its way to fulfilling this prediction.

RBC also reported a looming recession earlier this month, adding that Canada’s unemployment rate could rise by 1.7% over the next year and a half.