(Kitco News) U.S. Federal Reserve Chair Jerome Powell got more descriptive when answering another wave of questions dealing with inflation during a hearing before the Senate Banking Committee on Thursday.
“[Inflation] is not moderately above 2%, it is well above 2%. We understand that. It is also not tied to the usual things inflation is tied to. This is a shock going through the system associated with the reopening of the economy. We are not comfortable with that,” Powell said during his testimony before the Committee on Banking, Housing, and Urban Affairs.
The Fed chair described the current inflation pressures as “unique” in history, adding that they are a challenge for the Fed.
“We don’t have another example of the last time we reopened a $20-trillion economy with lots of fiscal and monetary support,” Powell said. “The challenge we are confronting is how to react to this inflation, which is larger than we expected. To the extent it is temporary, it wouldn’t be appropriate to react to it. But to the extent it gets longer and longer, we” have to continue to revaluate the risks that would affect inflation expectations, and that is what we are monitoring.”
Inflation expectations are critical to the price surge story because they create actual inflation, noted Powell.
“They are not at a troubling level now. But it is something we’ll be carefully watching,” he said. “We want inflation expectations to be anchored at 2%. Because if they are not, there is not much reason to think inflation will average at 2%.”
The next Federal Reserve’s monetary policy meeting will be especially important for the markets, with Powell saying that FOMC members will be discussing “substantial progress” made and the possibility of reducing its $120 billion a month asset purchases.
“We’ll discuss reducing asset purchases on substantial progress measured from last December. We’ll be making that assessment during the next FOMC meeting,” Powell said.
The next monetary policy meeting is scheduled for July 27-28.
Powell noted that there has been “a big uptick in inflation,” stating that the central bank is currently trying to understand whether it might have to act or not.
“One way or another, we won’t be going into a high period of inflation for a long period of time because we have tools, and we will use them,” he said. “We are very well aware of risks of inflations and watching carefully.”
Powell reiterated that most current price pressures are connected with used cars, new cars, rental cars, and airplane tickets. “These things are clearly temporary, but we don’t know when they’ll go away. What we don’t see now is broad inflation pressures showing up in other categories,” he said.
Debt was another issue discussed during the testimony, with Powell highlighting that the U.S. is not on a sustainable path.
“Debt is growing substantially faster than the economy. In the long run, that is not sustainable. The laws of gravity have not been repealed. We’ll need to get back on the sustainable path at some point. The time to do that is when the economy is strong — unemployment is low, taxes are rolling in. That is the time to do it.”
On the central bank digital currency (CBDC), Powell clarified that he is “legitimately undecided whether the benefits outweigh the costs or vice versa on CBDC.”
On Wednesday, Powell pointed out that one of the stronger arguments for CBDC was that it would replace the need for stablecoins.
On Thursday, he clarified his stance: “The more direct route would be to appropriately regulate stablecoins, which we don’t do right now … My point with stablecoins is that they are like money funds and bank deposits that are growing in popularity. We have to have appropriate regulation.”
The Fed would ideally get authorization and broad support for the central bank digital currency, he added. “Our obligation is to explore technology and policy issues in the next couple of years. My mind is open on this.”
One of the top risks on Powell’s mind is cyber risk, he added. “We have a playbook for bad lending and risk management. But cyber, as you see with ransomware issues, is an ongoing race to keep up. That is a thing I worry the most about.”
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.
