The likelihood of an interest rate hike from the Bank of Canada next week is growing as record levels of inflation and high housing prices coincide with an anticipated economic rebound from the Omicron wave of the pandemic, some economists say.
Scotiabank Economics said in a note to investors Wednesday that it expects the Bank of Canada to raise its key overnight rate by 25 basis points to 0.5 per cent at its next meeting Jan 26.
This would be the first of multiple interest rate hikes over the course of the year, senior economist Jean-Francois Perrault forecasts, with rates hitting two per cent by the end of 2022.
While the Bank of Canada signalled at the end of last year that interest rate increases were likely for 2022, it had pegged possible hikes towards the middle of the year.
But Perrault said in his note that the central bank could be forced to act sooner than anticipated after Statistics Canada reported on Wednesday that the annual rate of inflation hit 4.8 per cent in December — the highest level in 30 years.
“Despite a clear, but temporary, negative impact of Omicron on economic activity, it is clear that inflationary pressures are larger than earlier assessed and require a more robust monetary policy response,” he wrote.
A ‘pressing need’ for higher rates
James Orlando, a senior economist with TD Economics, told Global News in an interview that conditions are right for an interest rate hike in the near future.
“The Bank of Canada is in a position right now where inflation is at this uncomfortable level, where the economy is hot, where we’re likely going to bounce back strongly from this Omicron time period,” he said.
“There really is a pressing need for the Bank of Canada to raise interest rates.”
O’Toole takes aim at Canada’s economic update, rising inflation costs – Dec 14, 2021
Orlando also believes the hike will start with 25 basis points, noting that after nearly two years of rock-bottom interest rates tied to the pandemic, the central bank won’t “want to shock people.”
Though markets have built in an interest rate hike on Jan. 26, Orlando says there is a possibility the bank will hold off until its March announcement to wait for the Omicron wave to recede and see how businesses bounce back.
“But with everyone expecting it, the question for the Bank of Canada is, why should they wait?” he asks.
Stephen Tapp, senior economist at the Canadian Chamber of Commerce, agrees.
“My expectation is that, certainly, a rate hike is on the table next Wednesday,” he tells Global News.
He and Orlando said the Bank of Canada would be able to tie an interest rate hike to a monetary policy report due out the same day. Both noted the increase could wait until the March decision if the governors are feeling skittish about the Omicron recovery, but a warning of a looming increase would at least be in the cards for next week.
Tapp says inflation is having a two-pronged effect on businesses right now. Not only are their costs rising due to more expensive goods, but an anticipated need to increase wages in 2022 to cover inflationary pressures will continue to affect their bottom lines.
Can the Bank of Canada solve the ‘inflation puzzle?’
While the central bank might be feeling the pressure to raise interest rates to dampen inflation, some of the causes of surging prices could well be out of its hands.
“There is little that the Bank of Canada can do to address the biggest part of the inflation puzzle, and that is the pandemic-induced supply chain disruptions,” says Tu Nguyen, economist with accounting firm RSM Canada.
Nguyen and most other economists who spoke to Global News this week said inflation could remain around the five per cent mark for the next few months but eventually come back down toward three per cent by the end of the year, closer to the upper bound of the Bank of Canada’s targeted range.
Orlando says that Canada could see “further housing market acceleration” if the Bank of Canada doesn’t start to raise its overnight lending rates.
“As house prices go up, people get bigger and bigger mortgages, they lever themselves up to uncomfortable levels.” he says. “And so you just add so much more vulnerability to the economy.”
3:39 How inflation could impact the housing market in 2022
How inflation could impact the housing market in 2022 – Dec 15, 2021
TORONTO – Canada Goose Holdings Inc. says it has signed a deal that will result in the creation of its first eyewear collection.
The deal announced on Thursday by the Toronto-based luxury apparel company comes in the form of an exclusive, long-term global licensing agreement with Marchon Eyewear Inc.
The terms and value of the agreement were not disclosed, but Marchon produces eyewear for brands including Lacoste, Nike, Calvin Klein, Ferragamo, Longchamp and Zeiss.
Marchon plans to roll out both sunglasses and optical wear under the Canada Goose name next spring, starting in North America.
Canada Goose says the eyewear will be sold through optical retailers, department stores, Canada Goose shops and its website.
Canada Goose CEO Dani Reiss told The Canadian Press in August that he envisioned his company eventually expanding into eyewear and luggage.
This report by The Canadian Press was first published Sept. 19, 2024.
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
TORONTO – TD Bank Group, which is mired in a money laundering scandal in the U.S., says chief executive Bharat Masrani will retire next year.
Masrani, who will retire officially on April 10, 2025, says the bank’s, “anti-money laundering challenges,” took place on his watch and he takes full responsibility.
The bank named Raymond Chun, TD’s group head, Canadian personal banking, as his successor.
As part of a transition plan, Chun will become chief operating officer on Nov. 1 before taking over the top job when Masrani steps down at the bank’s annual meeting next year.
TD also announced that Riaz Ahmed, group head, wholesale banking and president and CEO of TD Securities, will retire at the end of January 2025.
TD has taken billions in charges related to ongoing U.S. investigations into the failure of its anti-money laundering program.
This report by The Canadian Press was first published Sept. 19, 2024.
