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Bank of Canada hikes rate to 2.5%. Here's what it means for you – CBC News

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The Bank of Canada has raised its benchmark interest rate by the largest amount in more than 20 years, sharply increasing the cost of borrowing in an attempt to rein in runaway inflation.

Canada’s central bank raised its benchmark interest rate Wednesday by a full percentage point to 2.5 per cent. That’s the biggest one-time increase in the bank’s rate since 1998.

The bank’s rate impacts the rate that Canadians get from their lenders on things like mortgages and lines of credit. Two of Canada’s big banks have already moved their benchmark rates in response, with Royal Bank and TD raising their prime lending rates from 3.7 per cent to 4.7 per cent as of Thursday morning.

The other major lenders are expected to follow suit in short order.

All things being equal, a central bank cuts the lending rate when it wants to stimulate the economy by encouraging people to borrow and invest. It raises rates when it wants to cool down an overheated economy.

After slashing its rate to record lows at the start of the pandemic, the bank has now raised its rate four times since March as part of an aggressive campaign to fight inflation, which has risen to its highest level in 40 years

Economists had been expecting the bank to raise its rate by three-quarters of a percentage point, but the full percentage point increase was ahead of even those high expectations. And even after this record-setting increase, more hikes are expected, because of how serious the spectre of stubbornly high inflation is.

Bank of Canada governor Tiff Macklem said the bank made the decision to front-load its rate-hiking campaign because Canadians “are getting more worried that high inflation is here to stay. We cannot let that happen.”

“We are increasing our policy interest rate quickly to prevent high inflation from becoming entrenched. If it does, it will be more painful for the economy — and for Canadians — to get inflation back down,” he said, noting that the bank doesn’t expect the official inflation rate to come down to three per cent until next year, and wont get back to its two per cent target until 2024.

WATCH | Bank of Canada governor explains why it’s so important to tame inflation: 

Bank of Canada announces a 1% interest rate increase

5 hours ago

Duration 0:31

Bank of Canada Governor Tiff Macklem raised the bank’s benchmark interest rate by a full percentage point to 2.5 per cent — the largest one-time increase since 1998 — to combat high inflation.

Large hike warranted, economist says

Economist Stephen Gordon with the University of Laval says it’s clear the bank has miscalculated the speed with which inflation was going to heat up, and are now trying to course correct on the fly.

“They’re paying a bit of a catch up here, and that’s partly why they’re going up so fast,” he said in an interview.

While the size of the hike was outside the norm, he says it was warranted given the unprecedented challenges facing the economy today.

“We’re in a situation where we have supply chain disruptions, really high oil prices, pent up demand coming out of the pandemic,” he said. 

“We’re in new territory here, so there’s very little to guide us in the way of history. We’re just going to have to feel the way forward.”

Housing market will feel the pinch

The impact of higher rates will be felt most directly on the housing market, as variable rate mortgages are closely tied to the central bank’s rate.

Canada’s housing market was red hot for most of the pandemic, as record low rates fuelled demand and pushed prices up to their highest levels ever. But that direction turned in the first part of this year, as the central bank’s signal that higher rates were coming took the wind out of the sails of insatiable demand. 

Average prices have fallen since March across the country, the Canadian Real Estate Association says. Wednesday’s rate hike will do nothing to reverse that trend.

Prospective home buyers must have their finances stress tested to ensure that they can withstand higher lending rates, and Wednesday’s rate hike will raise that testing bar to about seven per cent for fixed rate loans, and six per cent for variable loans.

If borrowers don’t pass the stress test, lenders are obligated to lower the amount they will lend to them, until they meet the bar. 

Anyone who currently has a variable rate loan — and anyone looking to get one in order to buy — will likely notice their mortgage rates go up almost immediately. 

On a $400,000 mortgage amortized for the normal time frame of 25 years, a borrower who signs up for a loan at a three per cent rate will pay $1,893 a month. But if their rate jumps by a full percentage point, the way the bank’s rate just did, that monthly payment will go up to $2,104 a month. That’s an extra $211 every month out of their budget.

If the rate goes to five per cent, the monthly payment jumps to $2,326, which would be more than 22 per cent higher than what they were originally paying.

More rate hikes expected

Increases like that are exactly what home owner Tim Capes was worried about last month when he switched his home loan from a variable rate to a fixed-rate mortgage.

“We felt the pain every time interest rates would go up and we’d get a letter from the bank that our mortgage would go up by a certain amount and the budget would get a tiny bit tighter,” he told CBC News in an interview.

Tim Capes, shown here holding his infant son Ben, owns a home in Markham Ontario. He had a variable rate mortgage on the property, but he recently decided to switch to a fixed-rate loan because he's worried interest rates are set to rise quickly.
Tim Capes holds his infant son, Ben, in front of his Markham, Ont., home. He had a variable rate mortgage on the property but recently decided to switch to a fixed-rate loan because he’s worried interest rates are set to rise quickly. (Craig Chivers/CBC)

After seeing his payment go up each time the central bank raised its rate in March, April and then June, Capes decided to bite the bullet and lock in at a fixed rate that is costing him about $700 more per payment than he was paying before, but at least comes with the certainty that it won’t change for the next five years.

“I definitely wish I had done it earlier when the rates were even lower because definitely selecting a variable in the first place was a mistake,” the Markham, Ont., resident said. “But we ultimately decided it was a mistake we could afford to correct. So we did.”

Economists are expecting several more rate hikes to come, and so is Capes.

“As those rate hikes start happening, it’s a lot easier knowing that my mortgage isn’t going up with every single rate hike.”

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Heat warning still in place for large swaths of central and eastern Canada

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Five provinces across central and eastern Canada continued to swelter in unseasonably hot conditions on Sunday, Environment Canada said as it extended a widespread heat warning into a second day.

The warning from the national weather agency covered broad swaths of southern Ontario, southern Quebec, New Brunswick, Nova Scotia and Prince Edward Island.

Monica Vaswani, a meteorologist with Environment Canada, says the size of the heat wave, while notable, is not unprecedented.

“When we do get heat events it’s basically due to warm air advections, or essentially an area of warm or hot air that’s moving up from the south into northern parts — the Canadian provinces,” she said in a telephone interview. “It’s not uncommon to see large swaths of that hot, moist air mass.”

Environment Canada says maximum temperatures are expected to reach or surpass 30 C and hit the low forties when combined with humidity.

Humid conditions are expected to be even more prevalent in the Atlantic provinces, Vaswani said.

“It would definitely be more humid in the maritime provinces because of the additional moisture provided by the ocean,” she said.

Sunday’s forecast from Environment Canada called for overnight temperatures in the low to mid-twenties, offering little relief from the daytime heat.

Cooler temperatures are forecast for Monday, although parts of Nova Scotia could continue to feel the overwhelming heat well into the day.

On the other side of the country, part of the British Columbia interior is also in the midst of a hot stretch that is expected to last until Tuesday.

And this is likely not the last of the heat events, at least not for Ontario, Vaswani noted.

“Some indications are suggesting that temperatures throughout the remainder of the month of August, aside from the coming week, may be slightly above normal, so that would indicate the potential for additional heat events to occur before the summer’s over,” she said.

During these extremely hot and humid periods, residents are advised to watch for signs of heat illness such as swelling, cramps and fainting, and to drink plenty of water, stay in a cool place and check on older family, friends and neighbours.

Summer-like conditions will likely linger into the fall season, Vaswani said.

“Given the trend that we’ve seen over the last couple of years, it does seem that our summers are generally starting a little bit later and lingering into at least September, even mid- to late-September, so I wouldn’t be surprised if we see something similar this year,” she said.

This report by The Canadian Press was first published Aug. 7, 2022.

 

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Many federal government employees balking at returning to offices – CBC News

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The federal government is facing pushback from employees reluctant to return to government offices after more than two years working from home.

Online forums for public servants have exploded in recent weeks with comments about the prospect of returning to offices, with employees comparing notes on the hybrid work plans each department is planning to adopt.

One comment by a Health Canada manager urging employees to return to the office, in part, to provide employees at a nearby Subway restaurant with more hours, blew up into a series of sarcastic memes online. 

A meme of Marie Antoinette.
A comment by a Health Canada manager urging employees to return to the office, in part, so that employees at a local Subway restaurant would get more hours sparked an explosion of memes in online discussions among federal workers. (Screen capture from Canada’s Federal Public Service on Reddit)

Public service unions say that while some employees want to return to working in government offices or are happy with a hybrid arrangement, a majority want to keep working from home as Canada experiences a seventh wave of COVID-19.

“We have done studies of our membership that show that 60 per cent of our members would prefer to stay in a work from home situation, 25 per cent would like to do a hybrid and 10 per cent would like to come back to the office full time,” said Jennifer Carr, president of the Professional Institute of the Public Service of Canada (PIPSC), which represents about 70,000 workers, including scientists and computer specialists.

Union wants remote work included in collective agreements

Carr said the union has been flooded with messages from concerned members.

“I would say that our inbox is now 90 per cent about return to the office, how people are not feeling comfortable, how they have questions about masking requirements, about the need and the necessity to come into the office when they can work in the safety of their own home and do the work efficiently.”

WATCH | Treasury Board president on federal employees‘ return to work:

Treasury Board president Mona Fortier on the future of work in the public service

22 hours ago

Duration 1:53

Treasury Board president Mona Fortier explains the steps the government is taking to adopt a hybrid work environment where many employees will work part of the time from offices and part of the time from their homes.

Greg Phillips, president of the Canadian Association of Professional Employees (CAPE), which has called for a suspension of the return to the office, said his members have long favoured hybrid work. They feel the return to the office is being rushed and that their concerns aren’t being addressed, he said. 

CAPE has more than 20,000 members including economists, translators, employees of the Library of Parliament and civilian members of the RCMP.

“By and large, the people that don’t want to go back into the office have been fairly vocal about it,” said Phillips.

“They haven’t even addressed … in a lot of cases, accommodation needs.”

The Public Service Alliance of Canada (PSAC) — the largest federal government union, with nearly 230,000 members — is calling on the government to be flexible about bringing employees back into the office and to address their anxieties.

“We know that most of our members are still working remotely, and many want to continue having that flexibility,” the union said in a statement. “Remote work has become a part of everyday life for many workers and we’ll continue to fight to enshrine it in our collective agreements during this round of bargaining with Treasury Board and agencies.”

‘Hybrid work is here to stay’: Treasury Board

In an interview with CBC News, Treasury Board president Mona Fortier said hybrid work is the future of the federal public service. She said it is up to each department or agency to figure out how to make it work while keeping employees safe and getting the job done.

“Hybrid work is here to stay,” said Fortier. “So we need to really understand that hybrid work will be part of how we deliver programs and services to Canadians. I know that a lot of people believe that COVID is gone, but we’re still in a COVID space.”

The latest debate over where public servants should work was sparked by a memo from Privy Council Clerk Janice Charette on June 29, urging public service managers to develop hybrid models of work that meet the operational requirements of their departments.

“Now is the time for us to test new models with a view to full implementation in the fall, subject to public health conditions,” she wrote.

Charette said hybrid work models offer “meaningful opportunities” such a more nationally distributed workforce and more flexibility for employees while bringing people back together in an office has benefits such as enhanced generation of ideas, knowledge transfer and building a strong public service culture.

Different plans for different federal departments

That memo prompted managers to start ramping up plans for employees to start to return to government offices after Labour Day and contacting employees to formalize how many days they would be expected to work from the office.

Union leaders say the result has been a patchwork quilt with some departments telling employees to return to the office several days a week while others are more flexible.

They say the wide range of policies is also resulting in some departments trying to poach the best and the brightest talent from other departments by offering more work from home flexibility and employees seeking transfers to departments more open to working from home.

Still others are considering leaving the federal public service, rather than return to government offices.

In online forums such as Canada’s Federal Public Service on Reddit, public servants have been comparing information about return-to-office plans. While a handful support the move, many are sharply critical of the plan to bring employees back into offices, the way it is being rolled out or who is being selected to return to the office.

A man looks out a window
Greg Phillips, president of the Canadian Association of Professional Employees, says his union members have long favoured hybrid work but feel the current return-to-office plan is too rushed. (Ashley Burke/CBC)

In some cases, commenters reported being told to return to the office only to spend their time in video conference meetings.

“Commuting an hour a day to see no one I work with and communicate almost exclusively with (MS) Teams and email is utterly pointless,” wrote one.

“There’s the email from our ESDC DM — expected in the office at least some of the time,” wrote another. “Excuse me while I scream obscenities into the void.”

Some complained their department announced one plan – only to change it.

“We were asked to sign telework agreements, in which full time telework was one of the options,” said one commenter who said they worked at the Justice Department. “And now, suddenly, full time telework is off the table and it’s a two day in office minimum.”

Risk of contracting COVID-19 a concern for some

“They pretty much told us we wouldn’t be forced back if we didn’t want to,” responded one commenter who said they worked at Statistics Canada. “Now minimum two days starting Sept. 12.”

For others, the concern is the risk of catching COVID-19 from a co-worker or the working conditions in some government office.

Leaders such as Phillips say the comments on forums like Reddit are in line with what they are hearing from their members.

“You see all sorts of government employees comparing notes between what one department is doing and another department is doing and it’s creating mass confusion.”

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A secret no more: Canada's 1st codebreaking unit comes out of the shadows – CBC.ca

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For years, Sylvia Gellman’s loved ones were left in the dark about what she did for a living in the early 1940s. 

But in a mansion that once sat along Laurier Avenue East, Gellman and her colleagues — many of whom were women — worked to assist a top secret mission: cracking codes and ciphers used in secret and diplomatic communications during the Second World War.   

“No one outside knew what we were doing,” the 101-year-old told CBC Ottawa on Saturday.

“You were so aware of it being a secret mission. And you didn’t tell anybody. And I followed that very closely. I didn’t even tell my family.”

On Saturday morning, a plaque honouring the Examination Unit, Canada’s first cryptographic bureau, was unveiled at the Laurier House National Historic Site, next door to where Gellman once worked.

The house was also the residence of William Lyon Mackenzie King, Canada’s prime minister during the Second World War.

Gellman said while her loved ones knew she had a top-secret job, they hardly understood the breadth of her work. Those duties included typing out decoded Japanese messages before they were rushed to what was then called the Department of External Affairs. 

Intelligence was also shared with the British government’s Bletchley Park, a centre of Allied code-breaking where names like Alan Turing walked the halls

Sylvia Gellman said while her family knew she had an important job during the Second World War, she kept its precise nature a closely guarded secret. (Joseph Tunney/CBC)

Having the unit’s contributions to Canada officially marked with a plaque was something of a pandemic project for Diana Pepall, who’s researched the bureau since 2014. 

It’s no surprise that so few people know about the efforts of Gellman and her coworkers, Pepall said. 

“When they left, they all got a memo saying, ‘Just because war is over and you’re no longer working here, you’re not allowed to talk about this for the rest of your life.'” she said. “I’ve seen the actual memo.” 

One woman Pepall found during her research said that two years of her mother’s life had always been unaccounted for — until they were filled in by the researcher’s efforts.

“The mother was right there, and then gave a 20-minute speech that nobody had ever heard before on her work at the Examination Unit,” Pepall said. 

Researcher Diana Pepall said the Examination Unit helped the nation become more independent of Britain. She’s been looking into the bureau since 2014. (Joseph Tunney/CBC )

Helped strengthen Canada’s independence

The unit’s success also marked an important milestone in Canada’s independence within the intelligence community.

In some ways, the Examination Unit grew into the Communications Security Establishment (CSE): the national cryptologic agency that provides the federal government with information technology security and foreign signals intelligence. Many employees went from one secretive organization to another, said Erik Waddell, who also works for CSE.

“The codebreaking work they did during the war proved, not only to our allies, but to Canadian government officials and ministers and the prime minister, that there was in fact a value in Canada having its own independent intelligence gathering ability,” he said. 

“[It also proved] that it was worth preserving that capacity after the war.”

The work of Gellman and others, Waddell said, also “helped build, foster and maintain” partnerships with its allies, something that’s been crucial to the establishment of Five Eyes, a key intelligence-sharing alliance on today’s world stage.

For Gellman, the Examination Unit was more than just her place of work: it was a second home where she met two lifelong friends. 

Having lost a brother in the war, Gellman said she understood her job’s importance and was proud to work at the cryptographic bureau.

“I felt the whole thing was amazing, what was going on,” she said. “I really did.”

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