The Bank of Canada is expected to raise its benchmark interest rate by half a percentage point on Wednesday, a move designed to rein in inflation, running at its highest level in decades.
There’s a virtually unanimous view among economists that the bank will move its benchmark lending rate to 1.5 per cent on Wednesday, the second such hike in a row and a crystal clear signal that the pandemic-induced era of cheap money has come to an end.
While that’s bad news for anyone who owes money or wants to borrow some, it’s not hard to see why the bank feels compelled to act.
The price of everything from food to gasoline and housing has exploded during the pandemic, as supply and demand imbalances brought about because of COVID-19 have coupled with record-setting amounts of stimulus cash to fuel inflation.
Officially, Canada’s inflation rate sits at 6.8 per cent, its highest level in 30 years. Costs for basic necessities, like putting food on the table and keeping a roof over one’s head, have gone up by even more, with food and shelter rising 9.7 and 7.4 per cent, respectively, in the past year.
The current inflation rate for necessities is two to three times higher than what the bank likes to see. While low interest rates aren’t the only factor driving up inflation, the central bank is feeling the pressure to move swiftly to cool things down.
Nathan Janzen, an economist with RBC, thinks Canada’s central bank is on track for a series of larger-than-normal hikes in a row, until its rate gets to roughly three per cent. Canada’s benchmark interest rate hasn’t hit that level since the 2008 financial crisis.
“The looming question is whether rates need to rise above that neutral range to get inflation back under control,” Janzen said.
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It’s hard to overstate the impact that interest rates more than twice as high as they were before the pandemic would have on the broader economy. The most obvious impact would be in the housing market.
After increasing at a torrid pace for most of the pandemic, Canadian house prices have started to cool down ever since the central bank made its first tiny rate hike in March. Sales are down sharply just about everywhere, and selling prices have inched lower too, down from an all-time high average of $816,000 in February to $746,000 in April.
May’s numbers are expected to show that downward pace quickening, and that’s before the impact of this week’s expected hike is factored in.
WATCH | Here’s what a central bank rate hike could do to the housing market:
Sung Lee, a mortgage broker with rate comparison website Rates.ca, said some buyers are already getting cold feet. And many of those who are still willing to jump in are finding themselves able to afford less than they anticipated.
“We’ve seen a slight dip in mortgage inquiries after the Bank of Canada first raised rates, which seems to be in line with the recent slowdown in the real estate market,” Lee said in a recent commentary.
Anyone wishing to get a mortgage to buy a home must have their finances stress tested in order to discern if they can handle higher rates. And even the relatively small rate hikes that have happened so far have many would-be buyers failing to meet the new, higher bar. They are then compelled to buy something more affordable — or hold off entirely.
Currently, most borrowers have their finances tested as if mortgage rates were 5.25 per cent; that’s quite a bit higher than the level many Canadians would get from a lender right now.
But as those real lending rates inch higher, the bar for the stress test gets raised too. This causes some prospective buyers “to either hold off on purchasing or turn to alternative methods to raise the amount of mortgage they can afford, such as credit unions or private lenders,” Lee said.
Analyst urges ‘aggressive’ rate hikes
Canada is far from the only central bank trying to battle inflation with higher lending rates, but strategists at Dutch bank ING say the Bank of Canada has a harder job than some because its economy is so heavily impacted by what its neighbour to the south does.
“To generate the same degree of monetary tightening, the Bank of Canada tends to need to be more aggressive on policy rate increases,” James Knightley and Francesco Pesole wrote in a commentary last week.
“We would argue that you cannot dismiss the possibility of a 75-point hike given the current macro environment.”
A hike of that size would take lending rates to where they were before the pandemic started — when the central bankers around the world were cautiously trying to get interest rates back up to something approaching normal.
More than two years into a pandemic, what “normal” means now is anyone’s guess, but bank watchers agree that the old rules will likely no longer apply.
Sports leaders top list of new Order of Canada appointees – CBC News
Canadian sports icons including Stacey Allaster, Donovan Bailey and Angela James are among the 85 new appointees to the Order of Canada this year.
This year’s list of appointees also includes Canada’s first Indigenous female MP, the first MP for Nunavut, and a number of contributors to the arts, including Emmy nominated actress Sandra Oh.
Considered one of Canada’s highest civilian honours, the Order of Canada is meant to recognize people who make “extraordinary contributions to the nation,” according to the Governor General of Canada website.
Allaster was named as a companion, the highest of the honour’s three levels, which also include the level of officer and member. There can be no more than 165 living companions at any time.
Born in Windsor, Ont., and raised in Welland, Ont., Allaster was an executive with the Women’s Tennis Association from 2006 to 2015, first serving as president before being promoted to chair and CEO in 2009.
During her tenure, she was instrumental in securing equal prize money for women at six WTA tournaments and all four Grand Slams. She also played a key role in streamlining the WTA calendar and securing a landmark international media agreement. In 2020, she was named as the first female tournament director of the U.S. open.
Allaster said she’s grateful for her time playing tennis in Canada and getting her first opportunity to work in the sport with Tennis Canada. “It’s very difficult to put into words how fortunate I am and now to be recognized by my country for everything that it’s giving to me is very humbling,” she said.
Allaster also said “it’s a dream come true” to see Canada develop some top tennis talent in the world throughout her career, including Bianca Andreescu and Leylah Fernandez.
Former Olympic and world champion sprinter Donovan Bailey will be invested as an officer of the order. The former world record holder won Olympic gold in 1996 in the men’s 100-metre race and in the men’s 4×100-metre relay.
“It’s incredible,” Bailey said of the appointment to the order. “I’m very blessed, I’m extremely humbled to have shared incredible moments with Canadians.”
Bailey said being invested with the Order of Canada is an official recognition of what he has been hearing from fans for the past few decades.
“Getting the officer of the Order of Canada is a tremendous honour, but I’m telling you that I’ve been validated for 27 years; I’ve been validated every single day by the incredible fans,” he said.
Angela James is a pioneer in women’s hockey, first as a player and now as the general manager and part-owner of the Toronto Six women’s pro hockey team.
The winner of four world championships, including the first in 1990 where she scored 11 goals in five games and was a tournament all-star, she said being invested in the order encapsulates all her achievements on and off the ice.
“I think it encompasses everything that I’ve pretty much done in my life, and to think that my life matters to Canadians is pretty special,” she said.
A star on the Canadian team before women’s hockey became an Olympic sport, James was one of the first two women inducted into the Hockey Hall of Fame in 2010 and said she hopes to continue to see women’s hockey grow.
“As long as we get together and work together as one then I think there is no stopping the women’s game,” she said.
Among the appointees to the order are a number of Indigenous leaders, including Canada’s first Indigenous woman elected as a member of Parliament.
Ethel Blondin-Andrew was first elected as the MP for the Northwest Territories in 1988, and would go on to become the minister of state for northern development in the cabinet of past prime minister Paul Martin.
She has continued to be an advocate for Indigenous women in politics, and recently took part in a United Nations panel in Geneva to discuss that topic.
Joining Blondin-Andrew in the order is former Nunavut MP Nancy Karetak-Lindell.
Karetak-Lindell was first elected as the MP for Nunavut in 1997, and became the territory’s first MP after it was recognized 1999.
“I’ve tried very hard to be the voice for people who might not have had a chance,” Karetak-Lindell said.
After stepping away from federal politics in 2008, she would later become the president of the Inuit Circumpolar Council in 2016, serving for a two-year term.
Although she said she feels honoured to receive the Order of Canada, she said “the biggest reward will always be in that maybe I made someone look to the future with more hope.”
Blondin-Andrew will be invested as an officer of the order, while Karetak-Lindell is being invested as a member.
Other Indigenous leaders among the appointees include Elders David and Imelda Perley of New Brunswick for contributions to education around Wabanaki culture.
Elders Reg and Rosemary Crowshoe of Alberta are similarly being recognized for their preservation of Blackfoot culture.
Contributors to the arts
A number of Canada’s top contributors to the arts have also been appointed to the order, including actress Sandra Oh, who will be invested as an officer.
The Emmy Award nominated actress is best known for the hit TV series including Killing Eve and Grey’s Anatomy. She has also lent her talents to the big screen in movies such as Turning Red and Under the Tuscan Sun.
Donald Mowat is also being recognized for his contributions to the big screen, having been the head of makeup and design on such films as The Fighter, 8 Mile, Sicario, Nightcrawler, Prisoners, Nocturnal Animals, Stronger, Blade Runner 2049.
Mowat was recently nominated for the Oscar for best makeup and hairstyle for Denis Villeneuve’s Dune.
On the music front, founder of the independent record label Attic Records Alexander Mair is being appointed as a member of the order.
Attic represented a number of Canadian artists and groups including Anvil, Irish Rovers, Triumph and Teenage Head.
The Order of Canada
Gov. Gen. Mary Simon has appointed the following people, who were recommended for appointment by the Advisory Council of the Order of Canada:
Companions of the Order of Canada
- Stacey Allaster.
- Frank Hayden (This is a promotion within the order).
- Peter Russell (This is a promotion within the order).
- Donald Savoie (This is a promotion within the order).
Officers of the Order of Canada
- Naomi Azrieli.
- Donovan Bailey.
- The Honourable Ethel Blondin-Andrew.
- Robert Davidson (This is a promotion within the order).
- Paul Dubord.
- Donald Enarson (deceased).
- François Girard.
- Ian Hodkinson.
- Angela James.
- David Lynch.
- Sandra Oh.
- Alberto Pérez-Gómez.
- David Waltner-Toews.
Members of the Order of Canada
- Frances Abele.
- Ajay Agrawal.
- Louis-Philippe Albert.
- R. Jamie Anderson.
- Suzanne Aubry.
- Hereditary Chief Stephen Augustine.
- Granger Avery.
- Michel Beaulac.
- André Blanchet.
- Marilyn Bodogh.
- Jacques Bourgault.
- Bernard Brault.
- Marilyn Brooks.
- Marion Buller.
- James Byrnes.
- Geneviève Cadieux.
- James Cassels.
- Euclide Chiasson.
- William Clark.
- Zane Cohen.
- Ethel Côté.
- Elder Reg Crowshoe.
- Elder Rosemary Crowshoe.
- Sheldon Currie.
- Reginald Davidson.
- Dorothy Dobbie.
- Eliahu Fathi.
- Madeleine Féquière.
- Staff Sgt. Gary Goulet, (Retired).
- Michael Harris.
- Paul Heinbecker.
- Deborra Hope.
- Sister Margaret Hughes.
- Moira Hutchinson.
- Gérard Jean.
- Adam Kahane.
- Nancy Karetak-Lindell.
- Eva-Marie Kröller.
- Gary Levy.
- Alexander Mair.
- Guy Matte.
- Milton McClaren.
- Roderick McKay.
- Ben Mink.
- Donald Mowat.
- Robert Munro.
- Sister Bernadette Mary O’Reilly.
- Donna Ouchterlony.
- Fred Pellerin.
- Elder David Perley.
- Elder Imelda Perley.
- G. Ross Peters.
- Sandra Pitblado.
- Guy Pratte.
- Parminder Raina.
- Joel Reitman.
- David Rush.
- The Honourable Anne Russell.
- Suzanne Sauvage.
- Martin Schechter.
- Jacques Shore.
- Ronald Tremblay.
- Guylaine Tremblay.
- Michelle Valberg.
- Germaine Warkentin.
- James West.
- Michael West.
- Margie Wolfe.
- Lorraine M. Wright.
- Robert Wyatt.
- Jan Zwicky.
Canada travel restrictions: Entry rules to remain until at least Sept. 30 – CTV News
The federal government announced Wednesday all existing border restrictions to enter Canada will remain in place until at least Sept. 30.
That means foreign travellers will still need to provide proof of being fully vaccinated to enter the country and unvaccinated Canadians or permanent residents will need to provide a molecular COVID-19 test taken prior to entering and quarantine for 14 days upon arrival.
The government is also still requiring all travellers, regardless of citizenship, to upload their vaccine information and travel documents to the ArriveCan app.
The restrictions were last extended on May 31.
The announcement by the Public Health Agency of Canada (PHAC) indicates a prolonged pause of random testing at all airports until mid-July for the fully vaccinated.
That pause was implemented on June 11 as Ottawa’s attempt to mitigate congestion and delays at airports caused by heightened travel demand and staffing shortages.
Their stated intention is to move COVID-19 testing for air travellers outside of airports to “select test provider stores” such as pharmacies or by virtual appointment.
“Moving testing outside of airports will allow Canada to adjust to increased traveller volumes while still being able to monitor and quickly respond to new variants of concern, or changes to the epidemiological situation,” the PHAC statement reads.
On June 11, the government also announced it was dropping the vaccine mandate for domestic and outbound international travellers effective June 20.
Many industry organizations and opposition MPs have long called on the government to drop various border measures, namely duplicative processes that slow down travel, arguing they have the potential to stifle Canada’s already depleted tourism sector.
In response, Canada’s ministers of health and tourism continue to reinforce that while the epidemiological situation in Canada has improved, the pandemic still exists.
“As we move into the next phase of our COVID-19 response, it is important to remember that the pandemic is not over. We must continue to do all that we can to keep ourselves and others safe from the virus,” Health Minister Jean-Yves Duclos said in the Wednesday statement.
He added that Canada’s border measures remain “flexible” and “guided by science and prudence.”
Air Canada to make 'meaningful reductions' to summer flight schedule – CBC News
Air Canada will cut dozens of daily flights this summer as the airline grapples with a series of challenges amid soaring demand for travel.
“Regrettably, things are not business as usual in our industry globally, and this is affecting our operations and our ability to serve you with our normal standards of care,” Michael Rousseau, the airline’s president and CEO, said in a statement released Wednesday.
“The COVID‑19 pandemic brought the world air transport system to a halt in early 2020. Now, after more than two years, global travel is resurgent, and people are returning to flying at a rate never seen in our industry.”
Rousseau said those factors are causing “unprecedented and unforeseen strains on all aspects of the global aviation system,” leading to flight delays and crowded airport spaces.
And it’s also spurring the airline to make “meaningful reductions” to its summer schedule “in order to reduce passenger volumes and flows to a level we believe the air transport system can accommodate,” he said.
Dozens of fewer round trips each day
Peter Fitzpatrick, an airline spokesperson, told CBC News that the changes would see Air Canada reduce its schedule by 77 round trips — or 154 flights — on average, each day during the months of July and August.
Prior to these reductions, the airline was operating about 1,000 flights per day.
“Three routes will be temporarily suspended between Montreal and Pittsburgh, Baltimore and Kelowna and one from Toronto to Fort McMurray,” Fitzpatrick said.
Fitzpatrick said “most” flights affected by the changes are out of its Toronto and Montreal hubs.
“These will be mostly frequency reductions, affecting primarily evening and late-night flights by smaller aircraft, on transborder and domestic routes,” he said.
But he said “international flights are unaffected, with a few timing changes to reduce flying at peak times and even out the customer flow.”
‘Not an easy decision’
Rousseau, the airline president, said Air Canada did what it could to prepare for these challenges, but it has to adjust its operations to the current circumstances.
“This was not an easy decision, as it will result in additional flight cancellations that will have a negative impact on some customers,” Rousseau said.
“But doing this in advance allows affected customers to take time to make other arrangements in an orderly manner, rather than have their travel disrupted shortly before or during their journey, with few alternatives available.”
Rousseau offered his “sincere apologies” to customers for any delays they have faced or will face.
“I also assure you that we very clearly see the challenges at hand, that we are taking action, and that we are confident we have the strategy to address them,” he said. “This is our company’s chief focus at every level.”
A majority of domestic flights have been delayed at some of the country’s busiest airports in recent days, according to the analytics firm Data Wazo.
Data Wazo says 54 per cent of flights to six large airports — Montreal, Calgary, Toronto’s Pearson and Billy Bishop airports, Ottawa and Halifax — were bumped off schedule in the seven days between June 22 and 28.
Some 38 per cent of the flights were delayed while 16 per cent were scrapped altogether.
Airlines and the federal government have been scrambling to respond to scenes of endless lines, flight disruptions and daily turmoil at airports — particularly at Pearson — a problem the aviation industry has blamed on a shortage of federal security and customs officers.
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