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Bank of Canada could hike interest rates past 3% in bid to bridle inflation – CP24 Toronto's Breaking News

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Christopher Reynolds, The Canadian Press


Published Thursday, June 2, 2022 11:24AM EDT


Last Updated Thursday, June 2, 2022 4:42PM EDT

OTTAWA – The Bank of Canada may need to raise its key interest rate to three per cent or beyond – more than double its current level – to ensure inflation doesn’t settle in for the long haul, its deputy governor says.

“We’re scared that this inflation becomes entrenched,” Paul Beaudry told reporters Thursday afternoon, while assuring Canadians the institution would prevent it.

In an earlier speech to the Gatineau Chamber of Commerce, he said the likelihood of even higher consumer prices on the horizon means the central bank will consider pushing its policy rate at least to the top end of its “neutral” range – between two and three per cent, which neither spurs nor hampers growth.

The rate has sat below two per cent since 2008, driven down by the housing crash that kicked off the Great Recession.

“Price pressures are broadening and inflation is much higher than we expected and likely to go higher still before easing,” Beaudry said in French Thursday morning.

“This raises the likelihood that we may need to raise the policy rate to the top end or above the neutral range to bring demand and supply into balance and keep inflation expectations well anchored.”

The annual pace of inflation rose to 6.8 per cent in April, the fastest year-over-year rise in 31 years as the price of goods from gas to groceries continued to climb.

The groundwork for more oversized hikes comes after the Bank of Canada on Wednesday raised its benchmark rate, bringing it to 1.5 per cent. The move marked the first back-to-back half-point hikes since scheduled rate announcements began in 2000. In April, the bank increased the rate by half a percentage point to one per cent.

Supply chain disruptions during the pandemic lasted longer than the central bank anticipated, exacerbated by unexpected events like Russia’s invasion of Ukraine and COVID-19 lockdowns in China, Beaudry said.

He said some Canadians feel inflation is already feeding on itself, driven by expectations of even costlier goods and services as wages rise to meet mounting prices in a self-reinforcing cycle. But he maintained that pandemic-related supply issues are the main driver of eye-popping price tags and that higher rates will bring down demand relative to supply, easing inflationary pressures.

The bank makes changes to its trendsetting interest rate in an effort to control inflation with a target of two per cent. Rate hikes aim to cool borrowing and spending by boosting the cost of loans linked to the benchmark, including variable-rate mortgages.

“The longer inflation remains well above our target, the more likely it is to feed into inflation expectations, and the greater the risk that inflation becomes self-fulfilling,” Beaudry said.

“History shows that once high inflation is entrenched, bringing it back down without severely hampering the economy is hard.”

Central banks across the globe were “caught flat-footed” amid an unprecedented situation, failing to foresee how quickly consumer spending would roar back after the pandemic’s early days and then how persistent the supply chain backlogs would prove, Bank of Montreal chief economist Douglas Porter said in an interview.

“This is the bank moving with a lot of pace to try to cut inflation off at the pass,” he said of Wednesday’s rate hike – and the promise of more to come.

Crimped global supply chains and higher prices on goods from electronics to wheat along with historically low unemployment at home will likely push inflation well past the bank’s previously projected rate of nearly six per cent for the first half of the year, it said Wednesday.

Domestically, spend-happy households and businesses are also overheating the economy, Beaudry said, though signs of fallout from three interest rate hikes in four months are already visible, particularly in the housing market.

Home sales dropped 12.6 per cent in April from March, and sat more than one-quarter below sales figures from April 2021, according to the Canadian Real Estate Association. The home price index dipped 0.6 per cent month over month.

“We think we can kind of rein this in without necessarily getting into a recession-type area,” Beaudry told reporters.

Optimism around inflation is not so broad. A March survey from the Canadian Federation of Independent Business found that small business owners expected to jack up prices 4.7 per cent on average in 12 months.

“That’s really what’s worrying us,” Beaudry said, referring to one-to-two-year inflation expectations. “The good part is, looking further out – five years out – people have confidence that we will bring it back.”

The bank is also easing pandemic-era stimulus measures by continuing so-called quantitative tightening, launched in April, as the government bonds it holds are no longer being replaced when they mature.

Asked whether Pierre Poilievre, widely seen as the frontrunner in the federal Conservative leadership race, was fair in demanding Bank of Canada governor Tiff Macklem be fired for acting as the Liberal government’s “ATM,” Beaudry replied: “No … We’re not in the business of politics.

“We haven’t managed to keep inflation at our target, so it’s appropriate that people are asking us questions,” he added.

The bank expects its holdings of Canadian government bonds, which sat at $440 billion at the end of last year, to fall to $280 billion by the end of 2023, a 35 per cent drop over two years.

This report by The Canadian Press was first published June 2, 2022.

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Ford government caps rent increases to 2.5% in 2023 – CityNews Toronto

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  1. Ford government caps rent increases to 2.5% in 2023  CityNews Toronto
  2. Ontario is doubling how much landlords can hike rent prices by in 2023  blogTO
  3. Ontario rent guideline highest increase in a decade  CP24 Toronto’s Breaking News
  4. Rent increases in Ontario capped at 2.5 per cent next year  Tbnewswatch.com
  5. View Full coverage on Google News



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Air Canada to reduce flights this summer amid 'customer service shortfalls' – CTV News

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Air Canada is planning to reduce its flights in July and August, according to a statement from the company’s president, as the airline continues to deal with “customer service shortfalls.”

“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 wrote.

The airline will be reducing its capacity as summer travel comes to a peak and pandemic-related restrictions on travel continue to lift.

In an emailed statement to CTV News Channel, an Air Canada spokesperson said the company will be reducing its schedule by an average of 154 flights per day for July and August. Prior to this change, Air Canada said it was operating around 1,000 flights per day. The routes most affected are flights to and from Toronto and Montreal airports. The changes will reduce the frequency of these flights, and will primarily affect evening and late-night flights on the airline’s smaller aircraft.

The spokesperson also said the airline will be temporarily suspending routes between Montreal and Pittsburgh, Baltimore and Kelowna, and Toronto and Fort McMurray. International flights will remain mostly unaffected, except for timing changes that the spokesperson said would reduce flying at peak times.

“To bring about the level of operational stability we need, with reluctance, we are now making meaningful reductions to our schedule in July and August in order to reduce passenger volumes and flows to a level we believe the air transport system can accommodate,” the statement reads.

While Rousseau acknowledges this will have a “negative impact on some customers,” he said he hopes giving this notice to the public of the airline’s reduced schedule will allow travellers to make other arrangements.

“We are convinced these changes will bring about the improvements we have targeted,” he said. “But to set expectations, it should also be understood the real benefits of this action will take time and be felt only gradually as the industry regains the reliability and robustness it had attained prior to the pandemic.”

Recent data shows that as we head into the summer travel season, more than half of all flights in and out of some of Canada’s major airports are being cancelled or delayed as the tourism and airline sectors continue to face staffing shortages. 

On Wednesday, the CEO of the Montreal-Trudeau Airport – where Air Canada said it would be reducing some of its flights – told CTV News Montreal that the airport was already in discussions with airlines to reduce the number of flights.

“We’re having discussions and it’s likely the frequencies — the number of flights we’ll have on a given destination — or destinations themselves,” Philippe Rainville said, adding that a staffing shortage at the airport is causing issues, most notably in loading and unloading luggage from planes.

Toronto Pearson International Airport is experiencing similar issues, with videos circulating on social media appearing to depict hundreds of pieces of luggage piled up in the baggage claim area.

“I have had conversations with the four largest airports and the two largest airlines just on Thursday and I will be having follow up conversations with them soon,” Transport Minister Omar Alghabra said at a press conference on Wednesday. “They know that they need to add more resources and they are working on that and we are offering our support to address these issues. But these are unacceptable issues.”

Airline and airport workers say some of the big reasons behind the struggle to address the industry’s staffing shortage are that they’re not being treated well, and their pay is not sufficient for how difficult the job is.

“There are so many screening officers that have quit because of low pay and poor working conditions that the airports are severely understaffed,” David Lipton, representative of the United Steelworkers union in Ottawa, told CTV National News on June 19.

Lipton said some unions are offering screening staff hundreds of dollars a week if they don’t take a vacation or sick days. 

With files from CTV News Montreal, CTV News Toronto, and Alexandra Mae Jones

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Accounting firm EY to pay $100M US fine after auditors caught cheating on ethics exams – CBC News

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Accounting firm Ernst & Young will pay $100 million US to settle U.S. Securities and Exchange Commission (SEC) charges that its auditors cheated on certified public accounting (CPA) exams and that it misled the agency’s investigators.

The London-based auditor admitted to the charges and agreed to pay what the SEC said is its largest fine against an auditor.

“EY acknowledges the findings determined by the SEC,” said Brendan Mullin, EY media relations director, adding that the firm’s response has been “thorough, extensive and effective.”

“At EY, nothing is more important than our integrity and our ethics.”

The CPA is the key qualification for accountants in the United States.

EY has also agreed to “undertake extensive remedial measures to fix the firm’s ethical issues,” the SEC said.

49 people got test answers ahead of time

The Wall Street watchdog found that 49 EY professionals “obtained or circulated” answer keys to CPA licence exams, while hundreds of others cheated to complete the continuing professional education components relating to CPA ethics.

“This action involves breaches of trust by gatekeepers … entrusted to audit many of our nation’s public companies. It’s simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams,” said Gurbir Grewal, the SEC’s enforcement director, in a statement.

“And it’s equally shocking that Ernst & Young hindered our investigation of this misconduct,” added Grewal.

EY submitted to the SEC that it did not have issues with cheating when, in fact, the firm had been informed of potential cheating on a CPA ethics exam by a member of staff, the SEC said.

It added that EY admitted it did not correct its submission even after an internal EY investigation confirmed there had been cheating, and even after its senior lawyers discussed the matter with the firm’s senior management.

The SEC’s order also finds that EY violated a Public Company Accounting Oversight Board (PCAOB) rule requiring the firm to maintain integrity in the performance of a professional service.

The SEC has ordered EY to retain two independent consultants to help remediate its deficiencies. One will review the firm’s policies and procedures relating to ethics and integrity. The other will review EY’s conduct regarding its disclosure failures, including whether any EY employees contributed to the firm’s failure to correct its misleading submission, the SEC said.

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