Ed joined BNN Bloomberg yesterday to discuss the probability of a recession. While he believes that a recession is “more likely than not”, Ed disagreed with the view that it was virtually guaranteed and instead placed the probability between two-thirds and three-quarters. He described the current business cycle as “supply destruction”, brought on by the unique circumstances of the pandemic lockdown and the war in Ukraine, a situation that makes accurate predictions a challenge. Ed highlighted the need to realign supply and demand, whether that be by constricting demand or expanding supply. He also expressed caution over the recent trend of rate hikes, as central banks are being forced to respond to short term pressures to control inflation rather than wait the 12-18 months to see the effects of tightening. That is why recession is the baseline prediction. He indicated that markets have priced in another 75 basis point increase in the Bank of Canada’s rate by years end, but not much more after that. Prices in the bond and equity markets are becoming more attractive for investors. While central banks are being very hawkish on inflation now, they are creating room for rates to be cut later if necessary, though they have to manage their quantitative tightening policies as well to retain the ability to respond if the economy begins to slowdown too quickly..