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Bank of Canada hikes benchmark interest rate again, to 3.25% – CBC News

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The Bank of Canada hiked its trendsetting interest rate by three-quarters of a percentage point on Wednesday, the latest move by the central bank in its mission to rein in runaway inflation.

After slashing its rate to near zero in 2020 to help stimulate the economy in the early days of the pandemic, Canada’s central bank has moved aggressively to raise lending rates to try to cool red-hot inflation, which has risen to its highest level in decades.

The bank’s rate impacts the rates that Canadian consumers and businesses get from their banks on things like mortgages, lines of credit and savings accounts.

At the start of the year, the bank’s rate was 0.25 per cent. After Wednesday’s move, it’s now at 3.25 per cent. That’s the highest level for the bank’s rate since early 2008, before the financial crisis.



While Canada’s inflation rate eased somewhat last month from its 30-year high of 8.1 per cent, the bank noted in its decision that most of that decline was due to gas prices, while the rest of the economy still saw “a further broadening of price pressures, particularly in services.”

That persistent underlying inflationary pressure is a big reason why “the policy interest rate will need to rise further,” the bank said, noting that it “remains resolute in its commitment to price stability and will continue to take action as required to achieve the two per cent inflation target.”

The move was widely expected by economists who monitor the bank. While the bank has now hiked its rate five times this year, economists think even more rate hikes are coming before the end of this year.

‘Aggressive’ series of hikes

Jimmy Jean, vice-president and chief economist with financial services conglomerate Desjardins Group, says the bank is making it crystal clear that it is committed to raising lending rates for as long as it takes to get inflation back down to below three per cent.

Five large rate hikes in barely six months, “by any historical standard is a very aggressive tightening cycle, but what the bank is saying today is that this is not over,” Jean said in an interview with CBC News on Wednesday.

Jean says it typically takes up to two years for the impact of higher rates to be fully felt in the economy, which means he thinks high rates will stick around through 2023 at least, even if they come at a cost of tipping the economy into recession.

“We’re already having the highest interest rates we’ve had since 2007 and it’s going to be very difficult to think that this won’t have a high impact on consumer budgets and even possibly on things like insolvencies,” he said.

WATCH | Expect even more rate hikes to come, economist says:

BOC’s big rate hike not the end, says economist

6 hours ago

Duration 4:47

The Bank of Canada’s ‘aggressive’ language along with its 75-basis-point boost in the bank rate sends the message that further interest rate hikes are ahead to bring down inflation, says Douglas Porter, chief economist for the Bank of Montreal.

The move will mean anyone with a variable rate loan is likely to see their payment change in the coming days to keep up with the central bank’s move. Two of Canada’s biggest banks, RBC and TD, raised their prime lending rates by the same amount the central bank did, effective Thursday. The others are expected to quickly follow suit.

Many mortgage holders have already felt those increases multiple times this year, as rates on variable rate loans have moved from below two per cent at the start of the year to in excess of four and in some cases five per cent today.

‘Trigger rate’ imminent for many loans

A large group of Canadian borrowers that has so far been relatively immune from rate hikes will feel this one, however, because of how those loans are structured.

Most variable rate mortgages give borrowers the option to keep their payment fixed, even if the rate changes. As interest rates increase, the amount of each payment that goes to paying down the principal gets reduced, while more and more goes toward the interest. That extends the length of the loan, even as the size of the regular payment doesn’t increase.

Eventually, that spread becomes so large that the loan payment becomes interest-only, at which point the payment terms have to be adjusted. It’s known as a trigger rate and “every mortgage broker in Canada and every bank … is getting a constant barrage of calls,” about it right now, mortgage broker Ron Butler says.

Ron Butler runs Butler Mortgage in Mississauga, Ont. (Laura MacNaughton/CBC)

The exact point a mortgage will be triggered will depend on the loan, but with rates increasing so far and so fast, many of them either already have tripped over the line or are about to.

Butler says as recently as six months ago, it wasn’t hard to get a loan charging about 1.5 per cent. But with five large rate hikes since March, that same loan today is now charging four per cent or likely more.

At that point, the original loan payment isn’t even enough to cover the interest portion — never mind paying down the balance a little.



“Clients who have a variable rate mortgage that have a static payment are worried that eventually they will hit a trigger point in their contract and their payments will increase,” Butler said.

‘I really have to buckle down’

Debbie Henry is one of them. Henry, who lives in the Toronto area, took out a variable rate loan in November of last year, that came with a fixed payment of $805 every two weeks. While her payment hasn’t changed yet, she is aware that her loan has a trigger point, and she’s worried she may soon cross it.

As things stand, she says she thinks her mortgage payment is effectively going entirely to the interest portion, and not paying down any principal at all.

“If it’s at that trigger rate I really have to buckle down,” she told CBC News in an interview. “I don’t want to be anxious about the mortgage because one way or another it’s going to get paid.”

Anshu Khanna has a fixed payment on a variable-rate loan for a property she owns in downtown Toronto, and she says her trigger rate hasn’t been activated yet.

“If it keeps going to a point where they have to raise the actual monthly payment then it’s going to start to pinch for sure,” she told CBC News in an interview. “We’ll see what happens.”

WATCH | Mortgage holders share their thoughts about rate hikes:

Mortgage holders nervous about higher rates

2 hours ago

Duration 1:45

On the streets of Toronto on Wednesday, many home owners told CBC News about their anxieties about the Bank of Canada’s rapid series of rate hikes this year.

It’s hard to tell exactly how many people are in the same boat, but data from the Bank of Canada suggests that roughly one third of all mortgages in Canada are variable rate loans, but within that, two-thirds of them have a fixed payment.

Canada’s biggest lender, the Royal Bank of Canada, estimated last week that it has about 80,000 home loans on its books that are soon to hit their trigger point. “Our records indicate you may be approaching your Triggering Interest Rate — a moment when your regular payment is no longer enough to cover the interest portion on your mortgage,” the bank told some of its mortgage holders in a recent letter obtained by CBC News.

“If this event occurs, your mortgage payment will automatically increase,” the letter said.

Of those affected, the average payment is likely to increase by about $200 a month, the bank’s chief risk officer Graeme Hepworth said on a call with financial analysts last month to discuss the bank’s quarterly results.

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Canada’s response to Trump deportation plan a key focus of revived cabinet committee

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OTTAWA, W.Va. – U.S. president-elect Donald Trump’s promise launch a mass deportation of millions of undocumented immigrants has the Canadian government looking at its own border.

Deputy Prime Minister Chrystia Freeland said Friday the issue is one of two “points of focus” for a recently revived cabinet committee on Canada-U.S. relations.

Freeland said she has also been speaking to premiers about the issue this week.

“I do want Canadians to know it is one of our two central points of focus. Ministers are working hard on it, and we absolutely believe that it’s an issue that Canadians are concerned about, Canadians are right to be concerned about it,” Freeland said, after the committee met for the first time since Trump left office in 2021.

She did not provide any details of the plan ministers are working on.

Public Safety Minister Dominic Leblanc, whose portfolio includes responsibility for the Canada Border Services Agency, co-chairs the committee. Freeland said that highlights the importance of border security to Canada-U.S. relations.

There was a significant increase in the number of irregular border crossings between 2016 and 2023, which the RCMP attributed in part to the policies of the first Trump administration.

The national police service said it has been working through multiple scenarios in case there is a change in irregular migration after Trump takes office once again, and any response to a “sudden increase in irregular migration” will be co-ordinated with border security and immigration officials.

However, Syed Hussan with the Migrant Rights Network said he does not anticipate a massive influx of people coming into Canada, chalking the current discussion up to anti-migrant panic.

“I’m not saying there won’t be some exceptions, that people will continue to cross. But here’s the thing, if you look at the people crossing currently into the U.S. from the Mexico border, these are mostly people who are recrossing post-deportation. The reason for that is, is that people have families and communities and jobs. So it seems very unlikely that people are going to move here,” he said.

Since the Safe Third Country Agreement was modified last year, far fewer people are making refugee claims in Canada through irregular border crossings.

The agreement between Canada and the U.S. acknowledges that both countries are safe places for refugees, and stipulates that asylum seekers must make a refugee claim in the country where they first arrive.

The number of people claiming asylum in Canada after coming through an irregular border crossing from the U.S. peaked at 14,000 between January and March 2023.

At that time, the rule was changed to only allow for refugee claims at regular ports of entry, with some specific exemptions.

This closed a loophole that had seen tens of thousands of people enter Canada at Roxham Road in Quebec between 2017 and 2023.

In the first six months of 2024, fewer than 700 people made refugee claims at irregular crossings.

There are 34,000 people waiting to have their refugee claims processed in Canada, according to government data.

In the first 10 months of this year, U.S. border officials recorded nearly 200,000 encounters with people making irregular crossings from Canada. Around 27,000 encounters took place at the border during the first 10 months of 2021.

Hussan said the change to the Safe Third Country Agreement made it less likely people will risk potentially dangerous crossings into Canada.

“Trying to make a life in Canada, it’s actually really difficult. It’s more difficult to be an undocumented person in Canada than the U.S. There’s actually more services in the U.S. currently, more access to jobs,” Hussan said.

Toronto-based immigration lawyer Robert Blanshay said he is receiving “tons and tons” of emails from Americans looking at possibly relocating to Canada since Trump won the election early Wednesday.

He estimates that about half are coming from members of the LGBTQ+ community.

“I spoke to a guy yesterday, he and his partner from Kansas City. And he said to me, ‘You know, things weren’t so hunky-dory here in Kansas City being gay to begin with. The entire political climate is just too scary for us,'” Blanshay said.

Blanshay said he advised the man he would likely not be eligible for express entry into Canada because he is at retirement age.

He also said many Americans contacted him to inquire about moving north of the border after Trump’s first electoral victory, but like last time, he does not anticipate many will actually follow through.

This report by The Canadian Press was first published Nov. 8, 2024



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Surrey recount confirms B.C. New Democrats win election majority

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VANCOUVER – The British Columbia New Democrats have a majority government of 47 seats after a recount in the riding of Surrey-Guildford gave the party’s candidate 22 more votes than the provincial Conservatives.

Confirmation of victory for Premier David Eby’s party comes nearly three weeks after election night when no majority could be declared.

Garry Begg of the NDP had officially gone into the recount yesterday with a 27-vote lead, although British Columbia’s chief electoral officer had said on Tuesday there were 28 unreported votes and these had reduced the margin to 21.

There are ongoing recounts in Kelowna Centre and Prince George-Mackenzie, but these races are led by John Rustad’s B.C. Conservatives and the outcomes will not change the majority status for the New Democrats.

The Election Act says the deadline to appeal results after a judicial recount must be filed with the court within two days after they are declared, but Andrew Watson with Elections BC says that due to Remembrance Day on Monday, that period ends at 4 p.m. Tuesday.

Eby has said his new cabinet will be announced on Nov. 18, with the 44 members of the Opposition caucus and two members from the B.C. Greens to be sworn in Nov. 12 and the New Democrat members of the legislature to be sworn in the next day.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.



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Port of Montreal employer submits ‘final’ offer to dockworkers, threatens lockout

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MONTREAL – The employers association at the Port of Montreal has issued the dockworkers’ union a “final, comprehensive offer,” threatening to lock out workers at 9 p.m. Sunday if a deal isn’t reached.

The Maritime Employers Association says its new offer includes a three per cent salary increase per year for four years and a 3.5 per cent increase for the two subsequent years. It says the offer would bring the total average compensation package of a longshore worker at the Port of Montreal to more than $200,000 per year at the end of the contract.

“The MEA agrees to this significant compensation increase in view of the availability required from its employees,” it wrote Thursday evening in a news release.

The association added that it is asking longshore workers to provide at least one hour’s notice when they will be absent from a shift — instead of one minute — to help reduce management issues “which have a major effect on daily operations.”

Syndicat des débardeurs du port de Montréal, which represents nearly 1,200 longshore workers, launched a partial unlimited strike on Oct. 31, which has paralyzed two terminals that represent 40 per cent of the port’s total container handling capacity.

A complete strike on overtime, affecting the whole port, began on Oct. 10.

The union has said it will accept the same increases that were granted to its counterparts in Halifax or Vancouver — 20 per cent over four years. It is also concerned with scheduling and work-life balance. Workers have been without a collective agreement since Dec. 31, 2023.

Only essential services and activities unrelated to longshoring will continue at the port after 9 p.m. Sunday in the event of a lockout, the employer said.

The ongoing dispute has had major impacts at Canada’s second-biggest port, which moves some $400 million in goods every day.

On Thursday, Montreal port authority CEO Julie Gascon reiterated her call for federal intervention to end the dispute, which has left all container handling capacity at international terminals at “a standstill.”

“I believe that the best agreements are negotiated at the table,” she said in a news release. “But let’s face it, there are no negotiations, and the government must act by offering both sides a path to true industrial peace.”

Federal Labour Minister Steven MacKinnon issued a statement Thursday, prior to the lockout notice, in which he criticized the slow pace of talks at the ports in Montreal and British Columbia, where more than 700 unionized port workers have been locked out since Nov. 4.

“Both sets of talks are progressing at an insufficient pace, indicating a concerning absence of urgency from the parties involved,” he wrote on the X social media platform.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.

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