WASHINGTON (AP) — Chair Jerome Powell said in an interview broadcast Sunday night that the Federal Reserve remains on track to cut interest rates three times this year, a move that’s expected to begin as early as May.
Powell, in an interview recorded Thursday for the CBS news program “60 Minutes,” also said the nation’s job market and economy are strong, with no sign of a recession on the horizon.
“I do think the economy is in a good place,” he said, “and there’s every reason to think it can get better.”
Powell’s comments largely echoed remarks he gave at a news conference Wednesday, after the Fed decided to keep its key interest rate steady at about 5.4%, a 22-year high. To fight inflation, the Fed raised its benchmark rate 11 times beginning in March 2022, causing loans for consumers and businesses to become much more expensive.
The Fed chair also reiterated that the central bank’s next meeting in March was likely too soon for a rate cut. Most economists think the first cut is likely to come in May or June.
With inflation steadily cooling, nearly all the 19 members of the Fed’s policy-setting committee have agreed that cuts in the central bank’s key rate will be appropriate this year, Powell said in the “60 Minutes” interview. A reduction in that rate would help lower the cost of mortgages, auto loans, credit cards and other consumer and business borrowing.
In December, Fed officials indicated that they envisioned three rate cuts in 2024, reducing their benchmark rate to about 4.6% by year’s end. Powell told “60 Minutes” that that forecast likely still reflected policymakers’ views.
As gauged by the Fed’s preferred measure, inflation fell to just 2.6% in December compared with 12 months earlier. And in the second half of 2023, inflation was measured at an annual pace of just 2%, matching the Fed’s target level, down drastically from a peak of 7.1% in the summer of 2022.
Powell attributed the inflation surge of 2021-2022 to the disruptions of the pandemic, including a shift in spending away from services, like restaurant meals, to goods, like home office furniture and exercise bikes. At the same time, COVID closed down or slowed factories across the globe, severely disrupting supply chains and causing widespread shortages of goods and components. Both trends, Powell said, accelerated inflation.
At the same time, Powell acknowledged in the interview, the Fed misjudged the duration of the resulting inflation, which it repeatedly suggested would prove short-lived. As he has before, Powell said the central bank moved too slowly to raise its key rate, which can help slow borrowing and spending. Inflation began spiking in mid-2021 yet the Fed didn’t start raising rates until March 2022.
“So in hindsight, it would’ve been better to have tightened policy earlier,” Powell said, referring to rate hikes. “I’m happy to say that. … We thought that the economy was so dynamic that it would fix itself fairly quickly. And we thought that inflation would go away fairly quickly without an intervention by us.”
At his news conference Wednesday, Powell signaled that the Fed was likely to cut rates this year but underscored that central bank officials wanted to see further evidence that inflation is in check.
“It’s not that we’re looking for better data — it’s just that we’re looking for a continuation of the good data that we’ve been getting,” he said. “We just need to see more.”
Also Wednesday, Powell repeatedly acknowledged the strength of the U.S. economy and noted that inflation had slowed without the sharp rise in unemployment and weak growth that many economists had said would be necessary to cool consumer demand and slow price increases.
“We’ve got six months of good inflation data and an expectation that there’s more to come,” Powell said Wednesday. “So this is a good situation. Let’s be honest. This is a good economy.”
Other Fed officials have expressed caution about the prospect of rate cuts, particularly after a government report Friday showed that job growth soared unexpectedly in December, a sign that businesses remain confident enough in the economy to add many workers.
Michelle Bowman, a member of the Fed’s Board of Governors, said Friday that once it was clear that inflation was in check, it would eventually become appropriate to cut rates.
“In my view,” she said, “we are not yet at that point.”
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
