(Reuters) – Several Federal Reserve policymakers say the U.S. central bank may need to ease monetary policy further to help nurse the economy through the coronavirus pandemic, minutes from their policy meeting last month showed on Wednesday.
FILE PHOTO: Flags fly over the Federal Reserve Headquarters on a windy day in Washington, U.S., May 26, 2017. REUTERS/Kevin Lamarque/File Photo
The Fed has already slashed interest rates to zero and bought trillions of dollars of bonds in response to the economic crisis spurred by virus, moves which have provided a boost to jobs and spending.
But, according to the readout of the July 28-29 policy meeting, members of the rate-setting Federal Open Market Committee saw the rebound in employment already slowing and additional “substantial improvement” hinging on a “broad and sustained” reopening of business activity.
Since last month, the number of new daily coronavirus infections has dropped, but is still averaging around 50,000, slowing business reopenings and, in some parts of the country, forcing schools to delay, reverse, or abandon plans to conduct in-person classes.
“Noting the increase in uncertainty about the economic outlook over the intermeeting period, several participants suggested that additional accommodation could be required to promote economic recovery and return inflation to the Committee’s 2% objective,” the minutes from the meeting said.
Policymakers last month discussed a range of possible approaches that could be appropriate “at some point,” including promising to keep interest rates low until certain economic benchmarks are met, or until a particular future date. The Fed used both options effectively during the last recession.
In what would be a novel approach for the Fed, policymakers also expressed little support for adopting caps or targets for Treasury yields. “Many participants judged that yield caps and targets were not warranted in the current environment but should remain an option” for the future, the minutes said.
The apparent swearing-off of pursuing a form of Treasury yield curve control did not go down well in the Treasury market. Yields on 30-year bonds and 10-year notes both rose notably.
“It seems the market is quite displeased with the discussion about yield curve control specifically,” said Tom Simons, a money market economist at Jefferies in New York.
MONETARY GAS PEDAL
The minutes also showed policymakers were nearing agreement on changes to the Fed’s policy framework, including its periodic “Statement of Longer-run Goals and Monetary Policy Strategy,” that could result in the U.S. central bank sticking with aggressive stimulus measures far longer than under its previous rubric.
Fed officials “agreed that … refining the statement could be helpful in increasing the transparency and accountability of monetary policy,” the minutes reported.
“Participants noted that the Statement on Longer-Run Goals and Monetary Policy Strategy serves as the foundation for the Committee’s policy actions and that it would be important to finalize all changes to the statement in the near future.”
Policymakers decided to revamp their policy approach in late 2018, when they worried that low inflation and low interest rates globally would mean they would need stronger tools than before to combat future recessions.
That was well before the pandemic ended a record-long period of growth and sent the world’s biggest economy into its sharpest downturn since the 1930s.
At the current juncture, with the U.S. unemployment rate at 10.2%, drastic cuts this month in government aid to households and businesses, and the virus continuing to spread, changing the Fed’s overarching framework may have little short-term impact on policy.
But it could signal the Fed’s readiness to keep its foot on the monetary gas pedal, and perhaps to take even more aggressive action ahead.
At the July policy meeting, all 17 policymakers supported leaving the target range for short-term rates between 0% and 0.25%, the minutes showed.
They also said the outlook for the economy hinged on the outlook for the virus, which has now killed more than 171,000 people in the United States, according to a Reuters tally.
And a number of participants said that since many provisions of the government’s massive late-March coronavirus rescue package are due to expire while the labor market is still weak, “additional fiscal aid would likely be important for supporting vulnerable families, and thus the economy more broadly, in the period ahead.”
Reporting by Jonnelle Marte, Ann Saphir and Howard Schneider; Additional reporting by Karen Brettell and Karen Pierog; Editing by Paul Simao
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.
