The Bank of Canada is cued up for another rate hike, but how far it will go has been the subject of much speculation.
Will it be 50 basis points, 75 and even 100 as some economists argue is possible?
“Wednesday’s headline decision could go any number of ways,” writes National Bank economist Taylor Schleich.
The Bank of Canada surprised markets when it raised its key rate by a full percentage point in July, and National argues that the risk of another such hike this month is greater than many expect.
Economists are focused on Bank governor Tiff Macklem’s comments in July: “[Front-loading] argues for getting our policy rate quickly to the top end or slightly above the neutral range.”
With the rate now at 2.5%, a 50 bps hike would put it at the top end of the neutral range of 2% to 3%, while a 75 or 100 bps hike would put it over.
While National expects a 75 bps hike tomorrow, its economists also think the odds of a 100 bps hike are greater than a 50. (National puts a 70% chance on 75 bps, 20% on 100 and 10% on 50.)
The reasoning flows from developments since the July meeting. Jerome Powell’s recent stark message that the U.S. Federal Reserve would likely impose more large interest rate hikes in coming months raised the hawkish bar globally.
“It would be an understatement to say that the BoC (and other central banks) are deeply concerned with inflation. The ultra-hawkish rhetoric heard from the FOMC … reflects sentiment that is likely shared by the BoC,” wrote Schleich.
National thinks the impact of that report will be marginal because the economy is still in excess demand, inflation is still too high and the labour market is still tight. Moreover, getting inflation down trumps growth in the Bank of Canada’s priorities right now.
“We’re not sure they’ll be patting themselves on the back over the GDP report, especially when you consider that StatCan’s recent business conditions survey didn’t signal much relief on the inflation/jobs backdrop,” wrote Schleich.
National is not alone in acknowledging the risk of a percentage-point hike.
While RBC also expects a 75 bps raise tomorrow, economists Nathan Janzen and Claire Fan write: “The bank’s commitment to front loading rate hikes in the face of red-hot inflation means an even bigger 100 bps increase … can’t be ruled out.”
Oh and there’s another important issue on the agenda for observers tomorrow: guidance on the future.
But they may be disappointed there.
CIBC chief economist Avery Shenfeld says no matter what is in store, (and CIBC expects a pause) Governor Macklem will keep a poker face.
“This isn’t the time for Governor Macklem to tell anyone that his hand is looking a bit weaker in terms of the room for additional rate hikes. So if he is contemplating a pause in October, he’ll try to keep that card close to his chest, by indicating that further rate hikes might still be required,” wrote Shenfeld.
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NEW FACE AT 10 DOWNING STREET Liz Truss reacts with her husband Hugh O’Leary, at the Queen Elizabeth II Centre after it was announced on Monday that she is the new Conservative party leader. Truss, who moves from her role as Foreign Secretary, beat former finance minister Rishi Sunak in the race to succeed Boris Johnson. She will be formally appointed as Britain’s Prime Minister today. With the pound near its lowest in decades and record underperformance in U.K. stocks — not to mention soaring inflation and an economy headed for recession — the new prime minister faces more than a few challenges. Photo by Stefan Rousseau/Pool via Reuters
Gas prices spiked more than 35% yesterday on news that Russia plans to keep its main gas pipeline to Europe shut indefinitely. Russia blamed Western sanctions for the outage, saying they were “causing chaos” in maintenance work.
The supply cut means Germany is unlikely to meet its target for filling gas storage sites to 95% by the start of November, and European governments are racing to head off an energy catastrophe come winter. EU energy ministers will meet this Friday to discuss urgent measures to tackle soaring energy prices including gas price caps and emergency credit lines for energy market participants, a document seen by Reuters showed.
The building energy crisis is also hitting markets. The euro dropped to its lowest in 20 years Monday and European equities fell.
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Ray Dalio, founder of the world’s largest hedge fund Bridgewater Associates, just predicted another 20% to 25% drop in markets. So what is the smart money doing given this gloomy outlook? Our content partner MoneyWise take a look at some of the biggest holdings at Bridgewater and how Dalio plans to weather the storm.
Today’s Posthaste was written by Pamela Heaven (@pamheaven), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.
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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.
