It’s been almost exactly one year since the Bank of Canada began aggressively raising its key overnight lending rate. Since then, Canadian households have struggled with ever-increasing debt payments. Borrowing costs are up a stunning 425 basis points in the last 12 months.
But the days of relentless rate hikes may be about to draw to a close. On Wednesday, the Bank of Canada unveils its latest interest rate policy. Many expect it to make good on a promise to hit the pause button.
“The bank will almost certainly hold the key overnight rate at 4.50 per cent on March 8,” said James Laird, CEO of Ratehub.ca and president of mortgage lender CanWise Financial.
In January, the central bank raised its key interest rate to 4.5 per cent, but it also indicated it was ready to end its year-long series of rate hikes.
“If economic developments evolve broadly in line with the MPR [Monetary Policy Report] outlook, Governing Council expects to hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases,” the Bank of Canada wrote in its official statement.
That’s a pretty significant caveat.
Since the bank’s last decision on Jan. 25, we have seen job numbers, GDP data, home sales statistics and, of course, inflation numbers.
Inflation is way down from last summer’s peak
The consumer price index spent most of the last several decades lumbering along between one and two per cent. As the effects of the COVID-19 pandemic began to take hold, inflation began to climb.
At first it was dismissed by many as merely “transitory.” But prices never got the memo and just kept climbing. The year-over-year rate eventually peaked at 8.1 per cent last June.
By then, central banks everywhere were aggressively boosting interest rates. Global supply chain issues were coming under control, and the worldwide price of oil had begun to come down off the heights it reached after Russia invaded Ukraine one year ago.
By last week, the CPI had decelerated to 5.9 per cent annualized. The shorter trends were slowing even more.
Food prices are still way too high, but the overall trend was seen as a clear positive by economists like TD’s Leslie Preston.
“This was another step in the right direction and in inflation starting to come down, so I was relieved to see it move in the right direction,” Preston told CBC News.
More recently, we’ve seen Canada’s economic growth data come in weaker than expected.
Weak GDP bolsters case for pause in rate hikes
GDP growth ground to a halt through the fourth quarter of last year. Economic growth flat-lined to end the year, coming in at precisely zero per cent.
December’s monthly numbers actually showed a contraction. That means businesses didn’t sell as much and consumers scaled back.
Counterintuitive though it may seem, that bad economic news may be the good news that variable rate mortgage holders have been waiting for.
“[This] mostly soft report won’t be a disappointment to policy-makers, as the Bank of Canada is openly attempting to take some steam out of the economy,” wrote BMO’s chief economist Doug Porter. “And zero-point-zero growth is about as little steam as one could ask for.”
So, he said, the GDP numbers simply “reaffirm” that the Bank of Canada won’t increase rates when it announces its rate decision on Wednesday.
“And if growth remains below potential — as we expect — they will likely stay on the sidelines,” he wrote in a note to clients.
WATCH | As Canadians face high food prices, Loblaw profits up 12%:
Loblaw profits up 12% as Canadians struggle with high food prices
9 days ago
Duration 2:47
Profits are up again for Canada’s largest food retailer. The Loblaw parent company says it earned nearly 12 per cent more last quarter compared to the same time a year ago, which is raising eyebrows for Canadians struggling with high food prices.
RBC’s senior economist Claire Fan agrees that the bank is all but assured to go ahead with its expected pause next week.
Going forward, she said, the jobs market will be one of the things to watch.
Red-hot jobs market too hot for Bank of Canada
Canadian employers added 150,000 jobs in January. That was about 10 times what economists had been expecting.
A consensus of economists believe another 5,000 jobs will be added when February’s numbers are released on Friday.
Fan said the real issue isn’t just the raw number of jobs being added; it’s whether wage growth continues to moderate.
Wages never rose as much as prices did. So workers have actually lost purchasing power over the last two years. Statistics Canada found wage growth peaked last November at 5.6 per cent.
WATCH | Canada’s economy is slowing, new data suggests:
Canada’s economy is slowing, new data suggests
4 days ago
Duration 1:42
There are signs the Bank of Canada’s plan to slow the economy is working as the gross domestic product has stalled, with a small dip in December, according to new data from Statistics Canada. That could mean a break from rising interest rates for struggling consumers.
Wages have now stabilized at about 4.5 per cent or so.
Fan said the central bank will look for that to moderate further. “If it’s still coming down, that’s probably enough to keep the Bank of Canada at its current position,” she told CBC News.
So GDP is slowing, inflation is decelerating and wage growth is moderating.
None of that is particularly good news for workers. But economists agree it should be enough to convince the Bank of Canada to make good on its pause and finally give a bit of a break to households struggling with rising debt payments and looming mortgage renewals.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
