The main data point invoked to support the “running hot” hypothesis is the unemployment rate, which at 5% is at a historic low. But the level of the unemployment rate only measures the current labour supply-demand balance. It does not indicate future economic trajectory: the economy can start with low unemployment, yet still experience a recession. And there are many factors (including demographic changes, and COVID disruptions to normal immigration patterns) which explain why the unemployment rate is relatively low, despite an economy that is actually lacking macroeconomic momentum.
An economy that was really “running hot” would have much stronger GDP growth (in the range of 4-5%, not under 1%), strong growth in leading indicators (like construction, business sentiment, and investment intentions), and rising real incomes. Canada has the opposite on all these measures. It is not credible to suggest the economy is “running hot”.
Despite this evidence, the Bank of Canada will almost certainly hike its interest rate again on Wednesday anyway. The Bank has been explicit that it targets inflation, not employment or GDP growth. Inflation is falling (for reasons unrelated to their interest rates), but nowhere near its 2% target. The Bank will keep hiking (even if economy enters recession) until its target is clearly in sight.
We can have an honest debate about whether this is the appropriate course of action. But we should be honest about the existing condition of Canada’s economy – which can be verified empirically. It isn’t “running hot.” It’s pretty cold already, and definitely getting colder.