Canada’s central bank will aim to keep the annual pace of price gains at its historic target rate, but will now more formally take into account the health of the job market as part of its inflation-targeting regime.
A new framework agreement between the federal government and the Bank of Canada announced Monday keeps at its heart a two-per-cent annual inflation rate.
However, the central bank will now also consider employment levels and how close they are to the highest level they can reach before fuelling inflation when setting its trendsetting interest rate.
Bank of Canada governor Tiff Macklem and Finance Minister Chrystia Freeland stressed there was no material change to the bank’s marching orders, and that the consideration of employment does not constitute a dual mandate to hit two different targets – a measure that was under consideration for the mandate.
The two framed the agreement as codifying the Bank of Canada’s interest in a healthy labour market, something the bank has stressed during the pandemic in explaining its moves.
“Monetary policy works better when people understand it,” Macklem said, “and, really, this agreement clarifies our objectives and it clarifies how we have and can use the flexibility that is built into our framework.”
Under the new agreement, the Bank of Canada may decide to allow inflation to sit closer to either end of the bank’s target range of one to three per cent for short bursts as it determines when the labour market hits its full potential.
It also has flexibility to keep its key interest rate at the lowest level possible for longer stretches to help the economy recover from a downturn.
Since 1991, the Bank of Canada has targeted an annual inflation rate of between one and three per cent, often landing in a sweet spot at two per cent.
Even under those previous mandates, the health of the labour market was a factor in decisions about whether to lower or raise rates, said BMO director of Canadian rates Benjamin Reitzes.
“Case in point, inflation is near five per cent and slack in the labour market has been a key reason why the (Bank of Canada) has kept policy rates at the lower bound,” he wrote in a note.
The Bank of Canada’s key policy rate since the start of the pandemic has been at 0.25 per cent, lowered there to prod spending during the COVID-19 induced downturn and subsequent rebound. As it stands, the bank doesn’t see a rate bump until April 2022 at the earliest.
Changes in the Bank of Canada’s target for the overnight rate influence the prime rates at the country’s big banks that are used as a benchmark for loans such as variable rate mortgages and home equity lines of credit. Changes in the rate may also influence bond yields, which can lead to changes in fixed rate mortgages and other borrowing.
Under the agreement Monday, the central bank said the rate may more often hit rock-bottom and remain there for longer if the bank believes it will help get inflation back on target.
A low-for-longer rate environment may sometimes be needed, the bank said, even if it boosts the likelihood that inflation could overshoot the two per cent target as the economy recovers.
Rate hikes could be more gradual than in the past as the bank figures out if it has properly estimated the full potential of the labour market, meaning that inflation could again rise above the bank’s target.
“This is one reason to think that inflation will, on average, be higher in the coming years than in the past decade, albeit not dramatically so,” said Stephen Brown, senior Canada economist with Capital Economics, noting inflation has averaged 1.7 per cent since the global financial crisis.
The bank noted that figuring out when the country has hit “maximum sustainable employment” may be “impossible” because it can’t be nailed down to one number, and is complicated by a greying workforce and increased digitization.
The bank plans to outline what labour market markers it is monitoring and detail those as part of its regular interest rate announcements.
The deal also outlines how the bank should consider climate change in its policies, although leaving it up to governments to hit emissions targets. “Monetary policy cannot directly tackle the threats posed by climate change,” the statement reads, latter adding that economic modelling should account for its affect on the financial system.
Alex Speers-Roesch with Greenpeace said that on the contrary, central bank policy can assist in fighting climate change. He pointed to the option of the bank buying more environmentally friendly assets, which the Bank of Canada is considering.
This report by The Canadian Press was first published Dec. 13, 2021
TORONTO – Cineplex Inc. reported a loss in its latest quarter compared with a profit a year ago as it was hit by a fine for deceptive marketing practices imposed by the Competition Tribunal.
The movie theatre company says it lost $24.7 million or 39 cents per diluted share for the quarter ended Sept. 30 compared with a profit of $29.7 million or 40 cents per diluted share a year earlier.
The results in the most recent quarter included a $39.2-million provision related to the Competition Tribunal decision, which Cineplex is appealing.
The Competition Bureau accused the company of misleading theatregoers by not immediately presenting them with the full price of a movie ticket when they purchased seats online, a view the company has rejected.
Revenue for the quarter totalled $395.6 million, down from $414.5 million in the same quarter last year, while theatre attendance totalled 13.3 million for the quarter compared with nearly 15.7 million a year earlier.
Box office revenue per patron in the quarter climbed to $13.19 compared with $12 in the same quarter last year, while concession revenue per patron amounted to $9.85, up from $8.44 a year ago.
This report by The Canadian Press was first published Nov. 6, 2024.
TORONTO – Restaurant Brands International Inc. reported net income of US$357 million for its third quarter, down from US$364 million in the same quarter last year.
The company, which keeps its books in U.S. dollars, says its profit amounted to 79 cents US per diluted share for the quarter ended Sept. 30 compared with 79 cents US per diluted share a year earlier.
Revenue for the parent company of Tim Hortons, Burger King, Popeyes and Firehouse Subs, totalled US$2.29 billion, up from US$1.84 billion in the same quarter last year.
Consolidated comparable sales were up 0.3 per cent.
On an adjusted basis, Restaurant Brands says it earned 93 cents US per diluted share in its latest quarter, up from an adjusted profit of 90 cents US per diluted share a year earlier.
The average analyst estimate had been for a profit of 95 cents US per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 5, 2024.
ST. JOHN’S, N.L. – Fortis Inc. reported a third-quarter profit of $420 million, up from $394 million in the same quarter last year.
The electric and gas utility says the profit amounted to 85 cents per share for the quarter ended Sept. 30, up from 81 cents per share a year earlier.
Fortis says the increase was driven by rate base growth across its utilities, and strong earnings in Arizona largely reflecting new customer rates at Tucson Electric Power.
Revenue in the quarter totalled $2.77 billion, up from $2.72 billion in the same quarter last year.
On an adjusted basis, Fortis says it earned 85 cents per share in its latest quarter, up from an adjusted profit of 84 cents per share in the third quarter of 2023.
The average analyst estimate had been for a profit of 82 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 5, 2024.
