adplus-dvertising
Connect with us

Economy

Fed to weigh further options for aiding US economy in peril – Advisor.ca

Published

 on


The central bank’s policy meeting coincides with a record-shattering resurgence of the coronavirus, which has caused an increase in business restrictions and made more Americans reluctant to shop, travel and dine out. Some analysts say the economy could shrink in early 2021 before recovering as vaccines combat the virus.

Economists are divided on whether the Fed will announce any new actions this week. One option the policymakers could take would be to announce a shift in the Fed’s bond purchases. The Fed has been buying $80 billion in Treasury bonds and $40 billion in mortgage bonds each month in an effort to keep borrowing rates down.

The idea of a shift would be to buy more longer-term bonds and fewer shorter-term securities, to hold down longer-term interest rates. The Fed has already cut its benchmark short-term rate to a record low near zero.

Yet the Fed’s tools take time to support the economy, which adds a layer of complexity given the short-term gloom and longer-term optimism.

“Near-term downside risk may not be enough of a reason” to provide more stimulus “if the outlook for the economy in three to six months remains strong,” Lewis Alexander, U.S. chief economist at Nomura Securities, said in a research note.

Another complicating factor is that even as negotiations continue, Congress has yet to agree on another round of urgently needed financial aid for millions of unemployed Americans, thousands of struggling businesses and cash-short states and cities.

Many Fed policymakers, including Chair Jerome Powell, have repeatedly urged Congress to provide more support. Most proposals on Capitol Hill include extending unemployment benefit programs that are scheduled to expire in about two weeks. At that point, roughly 9 million jobless people will lose all their unemployment aid, state or federal.

“They’re all looking to fiscal stimulus,” Tim Duy, an economics professor at the University of Oregon and author of the Fed Watch blog, referring to potential rescue aid from Congress.

Recent data is pointing to an economy that is getting worse. More Americans are seeking unemployment benefits, a sign that layoffs are likely rising, and overall hiring slowed in November to its slowest pace since April. Credit and debit card data suggests that holiday spending is weaker than it was last year.

Still, Fed officials may not yet be ready to take new steps, perhaps believing they have already provided nearly all the help they can for the economy through ultra-low rates.

At their meeting in November, Fed policymakers discussed the idea of buying more longer-term bonds, among other options, according to minutes published three weeks later. Doing so could further reduce the yield on 10-year Treasurys, which influence other borrowing costs, such as mortgage and credit card rates.

By contrast, the purchase of, say, two-year Treasurys has less effect on the most common loan rates, though it can help the Treasury market function more smoothly, which was the original goal of the Fed’s bond-buying program this year.

While Fed officials worry that the pandemic will severely harm the economy this winter, not all are sold on more stimulus.

“We expect very strong growth next year,” Robert Kaplan, president of the Federal Reserve Bank of Dallas, told CNBC this month. “But I think the next three to six months are going to be challenging. And it appears to us that growth is decelerating, and if this resurgence keeps heading the wrong way, which it is, that slowing and deceleration could get worse.”

But Kaplan, a voting member of the Fed’s policymaking committee, said, “I would not want” to alter the bond-buying program “at this point.”

He added: “I don’t know that increasing the size or extending maturities of our bond purchases would help address this situation that I’m concerned about over the next three to six months.”

“As always,” though, Kaplan said, “I will go into the meeting with an open mind.”

Other Fed bank presidents, including Charles Evans of the Chicago Fed and Mary Daly of the San Francisco Fed, have also suggested in recent weeks that a change to the bond-buying program at this point might not be necessary. Neither Evans nor Daly has a vote on the Fed’s policy committee, but they will participate in this week’s meeting.

Even if it doesn’t announce a policy shift this week, the Fed will likely provide additional guidance about its bond purchases. After its November meeting, it said it would keep buying bonds “over coming months.” The minutes from that meeting said that most policymakers wanted to provide more specific guidance “fairly soon.” Analysts have interpreted that to likely mean this week’s meeting.

The Fed isn’t expected to tie its bond purchases to any specific level of inflation or unemployment but instead suggest a more general goal. Alexander said it could be as simple as stating that bond purchases will continue “until the recovery is well-advanced.”

The minutes of the November meeting also showed that the policymakers expect to start slowing their bond purchases before they begin raising interest rates. And economists foresee no Fed rate hikes until as late as 2024 or 2025. On Wednesday, the Fed will issue forecasts through 2023 that are expected to show no rate hikes at all.

Let’s block ads! (Why?)

728x90x4

Source link

Continue Reading

Economy

Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

Published

 on

 

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 Press. All rights reserved.

Source link

Continue Reading

Economy

Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

Published

 on

 

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.

The Canadian Press. All rights reserved.

Source link

Continue Reading

Economy

Trump’s victory sparks concerns over ripple effect on Canadian economy

Published

 on

 

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.

The Canadian Press. All rights reserved.

Source link

Continue Reading

Trending