Analysts said that even with increasing recession fears in Canada, the central bank is likely to proceed with another interest rate hike next week after data showed core inflation persisting despite tight tightening. Financial markets are also betting on another 75 basis point move at the Bank of Canada meeting on October 26, raising the interest rate to a 14-year high of 4.0%. This would be on top of 300 basis points of increases since March. Also, this staggering pace of tightening – and the promise of more in the future – has made economists, consumers, and businesses increasingly certain that the Canadian economy will slip into recession sometime during the next twelve months. Likewise, Derek Holt, Head of Capital Markets Economics at Scotiabank, said: “They will never say it, but I think they are fully prepared to contemplate recession in their minds. I think they are open to it as a necessary evil to fight inflation.” Similarly, the inflation rate in Canada fell to 6.9% in September, down from the June peak of 8.1%, although it remains well above the Bank of Canada’s 2% target. Core price pressures showed little sign of easing, according to data released on Wednesday. Karen Charbonneau, Chief Economist at CIBC Capital Markets, said in a note: “It is clear that the Bank of Canada has not yet killed the ‘inflation dragon.’” The Bank of Montreal and other banks adjusted their rate hike requests to 75 basis points from 50 basis points following the data. Governor Tiff Macklem said last week that the economy is still overheated and that higher rates are needed to cool it down, which he said can be done without causing a recession. Macklem stated to reporters: “Saying growth needs to slow does not mean we need a prolonged period of negative growth,” adding: “We are working on updating our forecasts and will see where we end up, but I think you can expect to see very modest growth.” But Macklem also warned that continued U.S. dollar strength could mean higher rates. And the higher rates go, the greater the risk that a soft landing turns into a recession. Additionally, Canadian Finance Minister Chrystia Freeland warned on Wednesday about rising unemployment and that the economy will slow, but she stopped short of calling for a recession. Meanwhile, most Canadian companies now believe a recession is likely in the next 12 months, according to a Bank of Canada survey this week. However, Royce Mendes, Head of Macro Strategy at Desjardins Group, said Canadians would be short-sighted in assuming this contraction will be typical, describing it as a “monetary policy-caused recession,” and said this means the central bank will not begin cutting interest rates until inflation is “within shouting distance” of the manageable 1-3% range. But economists said this is a risky course of action.