Business

Goodbye ‘hawkish bias’: Here’s when economists think the Bank of Canada will cut rates

Published

8 months ago

January 25, 2024

Harry Miller

Economists react to Bank of Canada’s latest decision to hold and predict where policymakers are headed next

Bank of Canada governor Tiff Macklem. Photo by Adrian Wyld/The Canadian Press

The Bank of Canada held its benchmark interest rate at five per cent for the fourth consecutive time on Jan. 24. Here’s what economists, who widely expected the bank to hold, had to say about the announcement and when Canadians can expect a rate cut from the central bank.

Stephen Brown, Capital Economics

“The big change in the policy statement was that the bank dropped its bias toward more tightening,” said Stephen Brown, deputy chief North America economist at Capital Economics, in a note following the rate announcement.

He is interpreting that to mean Bank of Canada governor Tiff Macklem is edging closer to making his first rate cut, though “there was no sign that cuts are imminent,” Brown said.

The central bank could be of the mind now that inflation isn’t as bad as the headline numbers might suggest, Brown added, noting that the bank’s statement referenced the “outsized role” shelter costs — mortgage interest costs and rents — are having on the consumer price index.

At this stage, the central bank still believes the Canadian economy can avoid a recession and is calling for 2024 GDP of 0.8 per cent. However, Brown believes the bank is overestimating growth and that will force Macklem to shift to cuts sooner than expected.

“Given the shift in tone today, we are sticking to our view that the bank will be prepared to make policy less restrictive by beginning to cut interest rates at the April policy meeting,” Brown said.

Avery Shenfeld, CIBC

Avery Shenfeld, chief economist at CIBC World Markets, noted that the bank dropped its language regarding the need to hike rates again if inflation persisted, replacing that “hawkish bias” with the more cut-friendly wording that it remains “concerned” about persistent core inflation.

Shenfeld highlighted that the bank is forecasting that growth will pick up in the second half of the year and wondered if that was tied to its expectation for lower rates.

“The governor noted that the meeting has shifted from a discussion of whether rates are high enough to one about how long they need to keep rates at five per cent,” he said. That, he said, was a “dovish tilt … but is still consistent with our call for a first rate cut in June, with as much at 150 basis points of cuts on tap this year if, as we expect, we’ll need that to get the economy moving again after its current stall.”

Charles St-Arnaud, Alberta Central

Inflation remains too elevated for the Bank of Canada, and Charles St-Arnaud, chief economist of Alberta Central, expects it won’t make any moves to cut rates until its preferred measures of core inflation slows to around 2.5 per cent year over year — “something we do not expect until May 2024,” St–Arnaud said.

Currently, those core measures are in the 3.5 per cent range.

“However, a much weaker economy in 2024 is a risk that could force the BoC to move sooner,” he said, noting that a drop in job hiring or outright employment losses could be the deciding factor.

“The tone of the communiqué suggests that the BoC believes it is done tightening monetary policy but is not yet ready to declare victory in its fight against inflation,” St-Arnaud said. “The focus is now on how long interest rates will need to remain elevated to achieve its objective.”

Unless the economy says otherwise, St-Arnaud expects the opportunity to make the first rate cut will come in the middle of the year.

Nathan Janzen, Royal Bank of Canada

Although the Bank of Canada said in its policy statement that it is still worried about inflation, Nathan Janzen, assistant chief economist at Royal Bank of Canada, said there are plenty of reasons to believe that inflation will continue to slow.

Among them is the “softening economic backdrop,” including a sixth consecutive monthly decline in output per capita. The jobless rate, which has increased as employment is no longer able to match population growth, is another factor. Further, the central bank now estimates the economy has excess supply, taking pressure off inflation.

“We expect slower price growth alongside a weakening economic backdrop will push the BoC to start gradually lowering the policy rate late by mid-year,” Janzen said.

James Orlando, Toronto-Dominion Bank

The shift in the Bank of Canada’s thinking on the role of shelter costs in the inflation debate, with the central bank acknowledging that mortgage interest and rents are “problematic forces,” appeared to be the thing that struck Toronto-Dominion Bank director and senior economist James Orlando most about the Jan. 24 announcement.

“Shelter costs remain the biggest contributor to above-target inflation,” the central bank said in its statement. Some economists had been railing for months against the bank for not giving enough weight to the impact of shelter on inflation. Orlando seemed to think the Bank of Canada’s focus on weakness in the economy was “feeling long in the tooth,” and that it was time to expand its view. For example, there is plenty of hard evidence that consumers have cut spending to compensate for the higher cost of borrowing, he said.

“Normally, this would cause inflation to decelerate quickly, but structural imbalances in the real estate sector are keeping the BoC’s preferred inflation gauges elevated,” Orlando said in a note on Jan. 24. Markets took this apparent shift to heart, with odds of a rate cut in April or June increasing. “We echo this sentiment,” Orlando said.

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Business

Canada Goose to get into eyewear through deal with Marchon

Published

5 hours ago

September 19, 2024

Anne Joseph

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.

Companies in this story: (TSX:GOOS)

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Business

A timeline of events in the bread price-fixing scandal

Published

7 hours ago

September 19, 2024

Anne Joseph

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)

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Business

TD CEO to retire next year, takes responsibility for money laundering failures

Published

10 hours ago

September 19, 2024

Anne Joseph

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.

Companies in this story: (TSX:TD)

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