The Bank of Canada is expected to hold interest rates steady on Wednesday, weighing the resilience of the Canadian economy against stress in the global banking system as it waits for inflation to recede.
The bank has been in a holding pattern since early March, when it kept its benchmark lending rate stable at 4.5 per cent after eight consecutive increases. That made it the first major central bank to halt its rate-hike campaign.
Since then, the bank has received conflicting economic signals. The Canadian economy is holding up better than expected in early 2023, recent data show, largely defying efforts by the central bank to dampen consumer spending and push up unemployment.
At the same time, banking-sector turmoil in the United States and Europe over the past month has raised concerns about financial stability and dimmed the economic-growth outlook, with nervous banks expected to pull back on lending.
Governor Tiff Macklem has said the decision to pause rate hikes is “conditional,” and that the bank may move again if it sees an “accumulation of evidence” that inflation is not subsiding. But private-sector analysts see little chance that Mr. Macklem and his team would restart monetary-policy tightening this week, and rate cuts are off the table until inflation falls further.
The annual rate of Consumer Price Index (CPI) inflation stood at 5.2 per cent in February, down from a peak of 8.1 per cent last June, but still more than twice the central bank’s 2-per-cent target.
Central-bank economists expect CPI inflation to fall to around 3 per cent by the middle of the year. The bank will publish an updated quarterly forecast for inflation and economic growth on Wednesday.
“At this point, there is simply just not enough evidence for the BoC’s communications to tilt more dovish or hawkish, especially in the context of the recent round of financial instability,” Royal Bank of Canada rate strategists Jason Daw and Simon Deeley wrote in a note to clients.
“This will leave the market dissecting any small nuances to judge where policy is headed.”
Interest-rate increases work with a lag, curbing consumer spending as homeowners renew their mortgages at higher rates and businesses cut back on hiring. The Bank of Canada is forecasting near-zero economic growth through the first half of 2023. Most Bay Street analysts expect Canada will enter a mild recession this year.
So far, however, the economy is proving remarkably robust. After stalling in the fourth quarter, real gross domestic product rose 0.5 per cent in January from the previous month, and preliminary estimates suggest it grew a further 0.3 per cent in February. Canadian employers keep hiring workers, adding another 35,000 positions in March while the unemployment rate remains near a record low.
Bank of Canada officials have argued that unemployment will need to rise to get inflation back down to 2 per cent, and they have said that wages are growing too quickly without an accompanying increase in labour productivity.
“In this topsy-turvy world, good news for the economy isn’t really what we’re looking for,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, wrote in a note to clients.
“If the slowdown that central banks are aiming at fails to materialize, that could force yet more rate hikes, and risk a harder landing.”
The Bank of Canada’s quarterly business and consumer surveys, published last week, did contain some hints that the economy is approaching a turning point. Business sentiment continues to worsen and companies are expecting slower sales in the coming year. Consumers reported dialing back spending plans.
By pausing its monetary-policy tightening last month, the Bank of Canada managed to avoid some of the tough decisions that other central banks faced after the collapse of Silicon Valley Bank and two other regional banks, as well as the emergency sale of Credit Suisse to UBS Group.
The bank runs – caused in part by losses tied to rising interest rates – sparked fears of broader financial contagion. This put central banks in a delicate position: Should they keep raising rates to combat high inflation? Or should they hold off tightening to prevent further strain in the financial system?
The U.S. Federal Reserve, European Central Bank and Bank of England all pressed ahead with interest-rate increases last month, although they dialed back their inflation-fighting rhetoric.
After announcing a quarter-point increase on March 22 , Fed chair Jerome Powell suggested that U.S. interest rates may not need to go as high as previously anticipated because banking turmoil would likely lead to a contraction in lending, acting as a substitute for additional monetary-policy tightening.
Fears of a broadening financial crisis have subsided in recent weeks, but markets are still pricing in a lower peak for the Fed’s rate-hike campaign than previously expected, as well as several rate cuts before the end of the year.
Interest-rate swaps, which capture market expectations about monetary-policy decisions, are pricing in two quarter-point rate cuts by the Bank of Canada by the end of of 2023, according to Refinitiv data.
TORONTO – Canada Goose Holdings Inc. says it has signed a deal that will result in the creation of its first eyewear collection.
The deal announced on Thursday by the Toronto-based luxury apparel company comes in the form of an exclusive, long-term global licensing agreement with Marchon Eyewear Inc.
The terms and value of the agreement were not disclosed, but Marchon produces eyewear for brands including Lacoste, Nike, Calvin Klein, Ferragamo, Longchamp and Zeiss.
Marchon plans to roll out both sunglasses and optical wear under the Canada Goose name next spring, starting in North America.
Canada Goose says the eyewear will be sold through optical retailers, department stores, Canada Goose shops and its website.
Canada Goose CEO Dani Reiss told The Canadian Press in August that he envisioned his company eventually expanding into eyewear and luggage.
This report by The Canadian Press was first published Sept. 19, 2024.
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
TORONTO – TD Bank Group, which is mired in a money laundering scandal in the U.S., says chief executive Bharat Masrani will retire next year.
Masrani, who will retire officially on April 10, 2025, says the bank’s, “anti-money laundering challenges,” took place on his watch and he takes full responsibility.
The bank named Raymond Chun, TD’s group head, Canadian personal banking, as his successor.
As part of a transition plan, Chun will become chief operating officer on Nov. 1 before taking over the top job when Masrani steps down at the bank’s annual meeting next year.
TD also announced that Riaz Ahmed, group head, wholesale banking and president and CEO of TD Securities, will retire at the end of January 2025.
TD has taken billions in charges related to ongoing U.S. investigations into the failure of its anti-money laundering program.
This report by The Canadian Press was first published Sept. 19, 2024.
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