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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TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
Companies in this story: (TSX:ROOT)
The Canadian Press. All rights reserved.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
The Canadian Press. All rights reserved.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Companies in this story: (TSX:TRZ)
The Canadian Press. All rights reserved.
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