The Bank of Canada will make its first interest rate decision of 2024 on Wednesday, with investors and consumers looking for clues as to when they’ll see relief from the high cost of borrowing. Here’s what economists think the governing council of the central bank will have to say:
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Bank of Canada expected to hold interest rate steady, but tone could offer clues on cuts to come
The decision on what to do with interest rates is a bit of a no-brainer this time around, said Royce Mendes, managing director and head of macro strategy at Desjardins.
Besides what to do with rates, another important decision faces the bank on Jan. 24: Governor Tiff Macklem and his deputies will have to decide whether to emphasize inflation minus shelter (which is now at 2.4 per cent) or core inflation (which is on the rise) as a guide post for future decisions.
“In determining whether to emphasize the progress on inflation excluding shelter or the stickiness in the core median and trim measures, governing council will effectively be communicating whether or not the door is open to rate cuts in upcoming months,” Mendes said.
Rate watchers will be on the lookout for any shift in tone in the Bank of Canada’s accompanying statement.
Desjardins expects the bank of move off of the “hawkish” tone of its previous statement on Dec. 6 and “lean more dovish,” given feedback from the latest business and consumer outlook surveys that showed inflation expectations have eased.
Taylor Schleich and Warren Lovely, National Bank of Canada
The Montreal-based economics team from National Bank also expects rates to remain at five per cent — the fourth straight hold from the Bank of Canada following its last hike on July 12.
“Although growth projections will likely be downgraded and all-items CPI forecasts left broadly unchanged, we don’t think Governing Council has seen enough to remove its ‘threat’ to hike more if needed,” Taylor Schleich and Warren Lovely said in note on Jan. 22.
The Bank of Canada adopted a hawkish tone in the statement accompanying its previous decision on Dec. 6, noting that it remained prepared to raise rates if “needed.”
It’s possible the bank could “water down” the threat, but Schleich and Lovely said they “don’t see much upside to dropping that line at this point.”
Economic growth in Canada is slowing, but “stickiness” in core inflation and wages are forcing the bank to stay its hand on rate cuts, the duo believes.
Nathan Janzen, Royal Bank of Canada
The Bank of Canada got a reminder from December data that inflation isn’t fully yet “under control,” said Nathan Janzen, assistant chief economist at RBC.
“We expect the BoC to push back against the idea that a shift to interest rate cuts is coming soon,” he said in a note on Jan. 19.
Overall, RBC believes inflation is on its way down.
Janzen expects the Bank of Canada to make an initial cut in the middle of the year “followed by 75 basis points more later to lower the overnight rate to four per cent by the end of 2024.”
Tu Nguyen, economist, RSM Canada
Tu Nguyen, like most economists, expects the Bank of Canada to hold interest rates at its current level of five per cent.
She will also be parsing their commentary for signs of a shift in tone from governor Tiff Macklem and his deputies.
“Although the tone would likely shift to neutral, acknowledging the weakening economic conditions, they might feel it too early to signal rate cuts just yet given sticky wage growth and shelter price growth,” Nguyen said in a note on Jan. 23.
The Toronto-based economist believes the bank will start cutting rates in June, by 25 basis points, but believes it should start in April.
“A high interest rate environment is stifling business investment and consumption, which both have shown little to no growth for several months already,” she said. “Restrictive monetary policy will continue to squeeze businesses and consumers in the upcoming months while further dissipating inflationary forces.”
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TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
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Yuri Kageyama is on X:
The Canadian Press. All rights reserved.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
Companies in this story: (TSX:SHOP)
The Canadian Press. All rights reserved.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
Companies in this story: (TSX:REI.UN)
The Canadian Press. All rights reserved.
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