Business

Bank of Canada expected to kickstart rate-hiking cycle – BNN

Published

3 years ago

March 1, 2022

The Bank of Canada is expected to start a series of interest rate hikes this week to wrestle inflation down from a three-decade high.

All 27 economists surveyed by Bloomberg News anticipate Governor Tiff Macklem will raise the benchmark interest rate by a quarter percentage point to 0.5 per cent at a policy decision Wednesday. The Bank of Canada is also seen unveiling part of its plan to shrink holdings of government bonds acquired over the past two years.

Embedded Image — *Tiff Macklem speaks during an Ottawa news conference in May 2020. (Bloomberg News)*

The rate move would be the first increase in borrowing costs since 2018, starting what’s expected to be one of the fastest hiking cycles since the central bank adopted an inflation target three decades ago. Markets expect a total of six hikes over the next 12 months. Russia’s invasion of Ukraine is unlikely to deter the Bank of Canada, with surging prices for commodities buffering Canada from any broader global economic fallout.

“A hike this week will be the first step in the most consequential tightening cycle in decades,” Royce Mendes, head of macro strategy at Desjardins Securities Inc., said by email. “Central bankers need to slow red hot inflation without causing a recession.”

Wednesday’s decision at 10 a.m. in Ottawa is a statement-only affair with no new forecasts. But Macklem will give a speech and hold a news conference Thursday, where he’ll provide more insight into the decision.

The Bank of Canada, which has held its benchmark at the emergency level of 0.25 per cent since March 2020, has already begun laying the groundwork. At its last policy decision in January, Macklem warned higher borrowing costs are imminent in an economy at full capacity and no longer in need of extraordinary stimulus.

The central bank has also sought to reassure Canadians that despite a relatively optimistic outlook for inflation, officials are prepared to adjust quickly should price pressures prove to be stickier than forecast. Inflation is currently running at a three-decade high of 5.1 per cent, but officials continue to blame global supply chain issues that they anticipate will fade in coming months.

In its latest projections, the Bank of Canada sees inflation falling back to about 3 per cent by the end of this year and near its 2 per cent target in 2023.

“We will be nimble — and if necessary, forceful — in using our monetary policy tools to address whatever situation arises,” Deputy Governor Tim Lane said in a Feb. 16 speech.

What Bloomberg Economics Says…

“We expect a 25-bp hike, in our view — but express a willingness to ratchet up the pace if needed. A clear signal of another move in April is likely, as is language that flags balance sheet roll-off is imminent. Conflict between Russia and Ukraine is unlikely to shake the BoC’s resolve to start normalizing rates.”

–Andrew Husby, economist

There are risks to consider as lending costs rise, and the process will be a delicate balancing act. Canadian households are some of the most indebted among advanced nations. Housing is primary growth driver, a sector likely to cool as the cost of borrowing increases.

Markets are betting the Bank of Canada’s overnight policy rate will hit 1 per cent by June, and 1.75 per cent by this time next year. Banks use that benchmark to price borrowing costs for clients on variable-rate mortgages.

“Once the policy rate rises above 1 per cent, financial stability considerations will come to the fore,” Simon Harvey, head of foreign exchange analysis at Monex Europe Ltd., said by email.

The invasion of Ukraine and resulting global market turmoil are complicating the decision.

Even as it prepares to withdraw stimulus, the central bank will be ready to quickly pivot on policy and inject liquidity into financial markets should investors become even more rattled. Surging commodity prices, meanwhile, will only fuel inflationary pressure, and drive up incomes and demand in Canada’s resource-based economy. It’s a messy policy environment.

Macklem told lawmakers last month he’ll be deliberate and clear on rate hikes so that “monetary policy is a source of confidence rather than another source of uncertainty.” That in itself would have made a half percentage point increase this week unlikely. The events in Ukraine effectively rule out that possibility altogether.

In an interview with the Globe and Mail in January, Macklem said one option would be to start with a few rate hikes followed by a pause to “assess the situation” before moving again.

The Bank of Canada can also withdraw stimulus by allowing its bond holdings to run off rather than raising its policy rate — giving it some flexibility on the pace of hikes. The central bank has seen its holdings of federal government bonds rise by about $350 billion (US$275 billion) during the pandemic, and is expected to provide direction on Wednesday on its plans to unload those assets.

“The Bank of Canada will likely provide more guidance this week on how quantitative tightening will work,” Citigroup Global Markets Inc. economist Veronica Clark said by email. “That includes whether they end the full amount of reinvestments initially, or ramp up gradually.”

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Business

Roots sees room for expansion in activewear, reports $5.2M Q2 loss and sales drop

Published

1 day ago

September 13, 2024

Anne Joseph

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)

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Business

Talks on today over HandyDART strike affecting vulnerable people in Metro Vancouver

Published

2 days ago

September 12, 2024

Anne Joseph

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.

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Business

Transat AT reports $39.9M Q3 loss compared with $57.3M profit a year earlier

Published

2 days ago

September 12, 2024

Anne Joseph

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)

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