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Fed raises interest rate, sees possible acceleration in hikes

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Federal Reserve officials raised interest rates for the second time this year and upgraded their forecast to four total increases in 2018, as unemployment falls and inflation overshoots their target faster than previously projected.

The so-called “dot plot” released Wednesday showed eight Fed policy makers expected four or more quarter-point rate increases for the full year, compared with seven officials during the previous forecast round in March. The number viewing three or fewer hikes as appropriate fell to seven from eight. The median estimate implied three increases in 2019 to put the rate above the level where officials see policy neither stimulating nor restraining the economy.

The Federal Open Market Committee indicated that even though it’s stepping up the pace of interest-rate hikes, economic growth should continue apace. “The committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the committee’s symmetric 2 per cent objective over the medium term,” according to its statement following a meeting in Washington.

The statement omitted previous language saying that the main rate would remain “for some time” below longer-run levels. Other changes included referring to “further gradual increases” instead of “adjustments.” Officials also said that “indicators of longer-term inflation expectations are little changed.” Previously, the statement made separate references to survey-based and market-based measures of such expectations.

The S&P 500 Index of U.S. stocks fell after the Fed decision, while benchmark 10-year yields were up to 2.98 per cent from Tuesday’s 2.96 per cent. The Bloomberg dollar spot index, which tracks the performance of a basket of 10 global currencies against the greenback, climbed 0.1 per cent on the day.

While the course of interest-rate hikes remains gradual, the slightly more aggressive pace shows officials see more urgency to tighten policy, as unemployment already fell in May to the level they had forecast for year-end. U.S. growth is also getting a boost from US$1.5 trillion in tax cuts and a US$300 billion increase in federal spending, with inflation at the central bank’s 2 percent target for two months.

The statement retained language in place since late 2015 saying “policy remains accommodative.” Fed officials repeated their assessment that “risks to the economic outlook appear roughly balanced.”

‘Solid Rate’

“Economic activity has been rising at a solid rate,” the FOMC said in its statement. “Recent data suggest that growth of household spending has picked up, while business fixed investment has continued to grow strongly.”

Wednesday’s decision — the sixth quarter-point increase in 18 months, raising the benchmark federal funds target rate to a range of 1.75 per cent to 2 per cent — was a unanimous 8-0.

Chairman Jerome Powell is scheduled to hold a press conference at 2:30 p.m., his second since taking the helm from Janet Yellen in February. Powell has repeatedly played down the dot plot as a guide to future interest rates, though investors continue to focus on it.

Updating their quarterly forecasts, officials projected the policy rate at 3.1 per cent at the end of 2019, according to their median estimate — compared with 2.9 per cent seen in March — and 3.4 per cent in 2020, unchanged from the prior forecast.

Officials lowered their jobless-rate estimates after unemployment fell to 3.8 per cent as of May, matching April 2000 as the lowest reading since 1969. U.S. payrolls expanded by more than 1 million workers in the first five months of 2018, reaching the milestone faster than in the previous two years.

Fed policy makers now see U.S. unemployment at 3.6 per cent in the fourth quarter, followed by 3.5 per cent in 2019 and 2020, based on median projections. That compares with March’s forecasts for 3.8 per cent this year and 3.6 per cent in the following two years. Estimates of the long-run sustainable unemployment rate were unchanged at 4.5 per cent.

Inflation Forecasts

On inflation, policy makers forecast a slight overshoot of their target starting in 2018 at 2.1 per cent, and running through 2019 and 2020, compared with a 2020 overshoot in March’s projections. The Fed’s preferred price gauge — the Commerce Department’s personal consumption expenditures index — rose 2 per cent from a year earlier in March and April, after spending most of the past six years below it.

The core PCE index, which excludes food and energy and is seen by officials as a better gauge of underlying price pressures, is forecast to reach 2 per cent this year and 2.1 per cent in 2019 and 2020. The index rose 1.8 per cent in April from a year earlier.

U.S. central bankers again emphasized on Wednesday that the goal is “symmetric,” and they said in minutes of the May meeting that “a temporary period of inflation modestly above 2 per cent” would help anchor long-run inflation expectations around the target.

The median estimate for economic growth this year rose to 2.8 per cent from 2.7 per cent in March, with projections unchanged for 2.4 per cent in 2019 and 2 per cent in 2020. The committee’s forecast for the long-run sustainable growth rate of the economy held at 1.8 per cent, suggesting policy makers are skeptical of the effect of tax cuts on the economy’s capacity for growth.

IOER Action

Fed raised interest on excess reserves rate — known as IOER — by 20 basis points to 1.95 per cent, effective Thursday Action “is intended to foster trading in the federal funds market at rates well within the FOMC’s target range,” Fed said May minutes had flagged possibility of such a move as a “small technical adjustment” in implementing monetary policy.

Bloomberg.com

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A day in the life of legal pot: 'I threw the money at her, she threw the weed at me'

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Megan Kennedy had it choreographed: Cut a ribbon, sell some weed. Close to midnight, she told one of the regulars at her health food store in St. John’s exactly how much he’d need: $6.90 for a pre-rolled joint, taxes in. The customer counted the money and balled it up in his fist, holding it there for 20 minutes, careful not to lose any coins, waiting for 12:01 a.m. Wednesday – the time, as prescribed by the Newfoundland premier, for legal cannabis sales to start.

Kennedy, who co-owns Natural Vibe, a health food store with a new cannabis wing, wanted to make the first legal sale in Canada – a feat she was geographically positioned to do, being in the time zone that would first enter Oct. 17.

A few blocks along Water Street in St. John’s, the major cannabis retailer Tweed had a more intricate plan. The retailer flew Bruce Linton – CEO of Tweed’s parent company Canopy Growth – to the St. John’s outlet. He stood behind the counter to declare in front of a phalanx of invited news cameras that history had been made, handing over Tweed-branded bags to the first customers in a collision of commerce and counter-culture broadcast across the country.

At Natural Vibe, a short walk away, Kennedy knew about the scene at Tweed. There was a part of her that wanted to beat them. “I’m a really competitive person in my heart,” she said. “I just wanted to be the one.”


Jackson McLean bought cannabis at Natural Vibe in St. John’s at 12:01 a.m. Wednesday, making him one of Canada’s first buyers.

Courtesy of Jackson McLean

At midnight, she cut the red ribbon that was pulled across the countertop in her store. They started at a timer, counting down to 12:01. Kennedy turned to her first customer, Jackson McLean.

“I basically threw the money at her, she threw the weed at me, and we were done,” McLean said. “It felt just like New Year’s, but instead of a new year we’re going into a new era.”

From 12:01 a.m. Newfoundland Time, these firsts continued westward, with hordes of people waiting outside pot shops, or refreshing their browsers online, all grasping at something, probably just to buy weed, maybe witness history, but also, for some, to be history. For now, what’s clear is the day delivered characters, plucked by news reporters pacing the lines outside pot shops. There was the man named Ned Flanders, first into one of the stores in Calgary, though another man identified only as Rick was also a candidate for the city’s first customer. Kyle Sweezie waiting outside a shop in Edmonton was subject to a degree of social media notoriety after being photographed with a half-eaten McMuffin. So, too, was the bearded gentleman in Halifax who showed off a shoulder bag his mother made him in a TV interview with CBC News.

The federal Liberal government, responsible for Wednesday’s legalization, marked the day by announcing plans to simplify the process of receiving pardon’s for pot possession convictions. Public Safety Minister Ralph Goodale promised forthcoming legislation that will waive the five-year waiting period and $631 fee that applicants for pardons currently face.

“Now that the laws on cannabis have changed,” Goodale said, “individuals who previously acquired criminal records for simple possession of cannabis should be allowed to shed the stigma and the burden of that record.”

In New Brunswick, Brian Harriman was at a boardroom table in a warehouse past midnight, watching numbers projected on a whiteboard in the room. Traffic was surging on the province’s online cannabis store, hovering around 400 active users at a given minute, then jumping past 700. Harriman, CEO of New Brunswick Liquor Corporation that is managing the roll-out of the province’s government-run cannabis stores, said one of his staff kept refreshing their order totals – 12 purchases in the first nine minutes, 220 in the first hour. (Compare that to B.C., where the government site reportedly sold 1,000 cannabis products in the first hour.)

In the morning, Harriman posted himself inside one of New Brunswick’s 20 Cannabis NB retail stores, watching the people stream in after waiting an average of 35 minutes in line.

“In our stores all day, it’s been like kids on Christmas,” he said. “They’ve been waiting for this anxiously.”


Hugo Senecal celebrates the opening of the SQDC store on Ste-Catherine St. In Montreal Oct. 17, 2018. He was the first customer at that location.

John Mahoney / Postmedia

In Montreal, Hugo Senecal thrust his fist in the air, crying out from the front of a line outside a government-run Société québécoise du cannabis (SQDC) store on Ste.-Catherine Street that started at 3:45 a.m. “I’m basically a stoner,” he told the Gazette, “and I just want to be the first one to buy legal cannabis in Montreal.” Senecal was the first to buy, at least at that location. At another SQDC, one woman was waiting in the line of 250 with her two dogs, named Karl Marx and Rosa Luxemburg.

There were no lines in Ontario. There are no legal stores, not yet, as the new Progressive Conservative government sorts out licences for private retailers after scrapping its predecessor’s plan for government-run stores. Until April, cannabis sales will be confined to the province’s Ontario Cannabis Store website, which depends on Canada Post for delivery. But the possibility of a Canada Post strike as soon as Monday threatened to derail the province’s distribution scheme.

In Regina, delays meant that the closest cannabis store open on Wednesday was roughly 15 kilometres from downtown in Edenwold. By Wednesday morning, 30 people from Regina had made the trip to wait in line outside. In Manitoba, Winnipeg police posted a photo of a $672 ticket, issued for using cannabis in a motor vehicle.

On Wednesday afternoon, amid all the talk of pardons and tickets and waning supply, Don Clarke, another of Canada’s first-ever cannabis customers, was at home in Newfoundland. He had spent much of the previous night and early morning at his son’s pot shop outside St. John’s in Portugal Cove-St. Philip’s, where his son sold him two packages of pre-rolled joints just after midnight. Clarke hadn’t touched the joints. “I’ve been off it for a month,” he said. “I’ll give it a shot, but later on, probably around Christmas.”

Those joints are his claim to the first customer title, though, when asked about it, the 70-year-old seems more comfortable talking about politics or Newfoundland’s production of eggs. But he was happy to talk about his son, Thomas H. Clarke of THC Distribution, and how he was just buzzing around his shop as midnight came.

“I could hardly look at him because it would just bring tears,” Clarke said. “It’s a love thing. It just makes me emotional to see him so outgoing and busy and well-liked and accepted.”

With files from the Canadian Press and Postmedia News


Matthew Geahal holds up his purchase in front of a government cannabis store in Montreal, Oct. 17, 2018 as the legal sale of marijuana begins in Canada.

Ryan Remiorz/The Canadian Press

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Cannabis all in the family for pot shop founder

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He’s spent his whole life around cannabis, and the managing director of lifestyle brand Tokyo Smoke was in Winnipeg for the dawning of its new era.

“It’s a bit hard for me to put it into words. It’s a really unbelievable moment,” Alan Gertner said Wednesday morning at the company’s Goulet Street retail store. “To be in the store in Winnipeg, a store we built as a team, to get to see people here buy their first legal cannabis, it’s so heart-warming and exciting.”

Gertner flew in from Toronto to observe cannabis legalization activities. His grandmother moved from Canada to Humboldt Country, Calif., the historic epicentre of the illicit marijuana industry, while his father Lorne is considered the Godfather of Canadian cannabis, having founded the country’s first legal medical marijuana grower in 2004.


Customers pay for legal cannabis at Tokyo Smoke on Goulet Street in St. Boniface on Wed., Oct. 17, 2018. Kevin King/Winnipeg Sun/Postmedia Network

Gertner left his job as a Google executive to start Tokyo Smoke with his father three years ago, its parent company Hiku Brands bought by Canopy Growth Corporation in July.

He said while the world is learning about the benefits of cannabis in the medical field, opening the door to recreational use means more open conversation about the responsible use of pyschoactives in general.

“This is the beginning of a truly global revolution,” Gertner said. “It’s Day 1 of something I really and truly believe will change the world.”

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Fantastic turnout for opening of Yarmouth NSLC Cannabis Shop, says store manager

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YARMOUTH – Close to 80 lined up outside the Yarmouth NSLC at 10 a.m. on Oct. 17, waiting for the Cannabis Shop to open for the first time.

The historic event took place at similar venues across Canada, as the nation became the second nation in the world (Uruguay made the big leap in 2014) and the first G7 country to legalize sales of the drug.

Yarmouth NSLC manager Mike Wilson says he was very pleased with the turnout.

“One of the larger outlets in Halifax had 200 standing in the lineup. For a small town like Yarmouth, this is great. Good support,” he said.

Customers must be 19 or older to shop in the cannabis section of the NSLC and photo ID is required. Loose flower and pre-rolls as well as oils and gel caps will be sold in the shop.

Jason McCaw was the first person in Yarmouth to legally buy recreational marijuana.

“I got two grams of the strongest stuff they have,” he says.

He thought the price was reasonable.

“I smoke daily, so I’ll definitely be here for more than special occasions,” he said.

In terms of pricing, cannabis will follow the same pricing strategy, structure and principles that the NSLC uses to manage all beverage alcohol categories. There will be three categories of cannabis pricing – value, core and premium.

At present, one gram of flower is priced $6.33 – $8.49 for value cannabis, $9 – $10.98 for core cannabis and $10.99 and up for premium cannabis.

The NSLC currently has 97 products representing 52 strains in inventory. Based on estimated sales projections, it expects to have a three-week supply of inventory on hand opening week. The supply challenges are being experienced nationwide.

Dave DiPersio, NSLC’s senior vice-president and chief services officer, says suppliers are working hard to get the product labelled and shipped. “We will process inventory receipts as quickly as possible, so product is available for our customers,” he said.

Cannabis is also available online and at 11 other NSLC stores across the province.

Product is delivered in a Canada Post envelope for a flat rate of $7, but customers must visit an NSLC store first to obtain a code. Upon delivery, ID must be presented to show you are 19 or over. No more than 30 grams can be purchased at any one time.

As a “fifth generation teetotaller,” its unlikely NDP Leader Gary Burrill will be buying any cannabis now that’s it legal.

When asked – while visiting the region in Shelburne on Oct. 17 – about what he thought about the Nova Scotia government’s roll-out, Burrill said his concern is “whether or not the government’s plan to distribute is going to be effective in its main goal to shut down the illicit market."

"In order to do that cannabis has to be available widely throughout the province,” he said. “There’s with only 12 stores. Other provinces have made it more widely available.  I think in Nova Scotia if they only had 12 liquor stores who would be making the dollars? The bootlegger. The idea is to not have the cannabis bootlegger making the dollars which is going to  be hard to  do  with only 12 stores but we’ll have to wait and see.”

More about Cannabis

Check out what some Digby residents think about the legalization of marijuana

Cannabis rules: what to expect in Nova Scotia

NSLC cannabis website

Cannabis in Canada website

Each province and territory will have the ability to set its own rules for cannabis

Individual municipalities may also pass bylaws to regulate the use of cannabis locally. Check your municipality for local information.

It is illegal now and will remain illegal to take any amount of cannabis across Canada's international borders.

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