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Bank of Canada prepared to raise rates further if inflation progress stalls

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The Bank of Canada’s policymakers said they are still prepared to raise their benchmark interest rate further even as they hiked rates to their highest level in 22 years earlier this month.

The central bank on Wednesday released notes of the deliberations surrounding its interest rate decision on July 12, which saw the policy rate rise 25 basis points to 5.0 per cent.

The Bank of Canada’s July hike followed another quarter-percentage-point increase to the policy rate in June. Many economists at that time predicted a single rate hike would not have been sufficient to satisfy the central bank’s concerns that the decline in inflation could stall.

Debate ensued among observers and economists following the July 12 decision over whether the latest rate hike was really needed as inflation fell into the central bank’s one-to-three per cent target range.

The central bank governing council’s consensus in July was that leaving the key policy rate unchanged at 4.75 per cent would risk stalling the progress it had made in tamping down price increases, which has so far seen annual inflation cool to a low of 2.8 per cent from highs of 8.1 per cent last year.

But the “underlying inflation pressures” are proving “more persistent than expected,” policymakers expressed earlier this month. At the time of the July rate decision, more than half of the items in Statistics Canada’s consumer price index basket were seeing prices rise more than five per cent annually, the deliberations note.

Policymakers also flagged that “downward momentum in headline inflation was waning” and measures of core inflation, which strip out more volatile measures such as prices for gas and food, were showing signs of holding around 3.5 to 4.0 per cent.

Inflation could even rise again if the Bank of Canada did not continue to put pressure on the economy through higher rates, the governing council decided.

The governing council said that not acting forcefully enough to rein in inflation now could mean the central bank has to raise rates much higher later; conversely, if it raises the policy rate too high now, it risks making things “more painful than necessary” for Canadians.

“The consensus among members was that the cost of delaying action was larger than the benefit of waiting,” the deliberation notes read.

 

How the Bank of Canada is deciding where to go next

The central bank’s policymakers said that Canada’s labour market continues to show signs of tightness and household savings are still above pre-pandemic levels, which is continuing to fuel “excess demand” in the economy.

In the Bank of Canada’s surveys of businesses and consumers, short-term expectations for inflation are easing but remain elevated. Businesses continue to expect more frequent and substantial price increases as well, something the governing council flagged as needing to “normalize” before the inflation fight is over.

In preliminary discussions of where to take the key rate next and how to communicate its messaging, policymakers opted to leave future rate decisions up to a meeting-by-meeting basis.

“They agreed they were prepared to raise the policy rate further if inflationary pressures did not ease as projected and progress toward the (two per cent) target stalled,” the deliberations read. “But they did not want to do more than they had to.”

The Bank of Canada’s next interest rate decision is set for Sept. 6.

BMO senior economist Robert Kavcic said the deliberations did not reveal anything new about the July 12 decision, but does spell out the conundrum the Bank of Canada finds itself in.

“So, here is basically what the Bank is grappling with right now,” he wrote in a note to clients on Wednesday. “Either policy isn’t tight enough; or it is, but hasn’t been tight enough for long enough.”

While BMO is not expecting any further rate hikes this year, Kavcic wrote that the risks are weighted towards further tightening if the economic forecast doesn’t pan out to the Bank of Canada’s liking.

In an updated outlook released at the same time as the rate decision in July, the central bank called for inflation to hold around the three per cent market for the next year before dropping down to the two per cent target by mid-2025.

 

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Canada’s Denis Shapovalov wins Belgrade Open for his second ATP Tour title

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BELGRADE, Serbia – Canada’s Denis Shapovalov is back in the winner’s circle.

The 25-year-old Shapovalov beat Serbia’s Hamad Medjedovic 6-4, 6-4 in the Belgrade Open final on Saturday.

It’s Shapovalov’s second ATP Tour title after winning the Stockholm Open in 2019. He is the first Canadian to win an ATP Tour-level title this season.

His last appearance in a tournament final was in Vienna in 2022.

Shapovalov missed the second half of last season due to injury and spent most of this year regaining his best level of play.

He came through qualifying in Belgrade and dropped just one set on his way to winning the trophy.

Shapovalov’s best results this season were at ATP 500 events in Washington and Basel, where he reached the quarterfinals.

Medjedovic was playing in his first-ever ATP Tour final.

The 21-year-old, who won the Next Gen ATP Finals presented by PIF title last year, ends 2024 holding a 9-8 tour-level record on the season.

This report by The Canadian Press was first published Nov. 9, 2024.

The Canadian Press. All rights reserved.



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Talks to resume in B.C. port dispute in bid to end multi-day lockout

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VANCOUVER – Contract negotiations resume today in Vancouver in a labour dispute that has paralyzed container cargo shipping at British Columbia’s ports since Monday.

The BC Maritime Employers Association and International Longshore and Warehouse Union Local 514 are scheduled to meet for the next three days in mediated talks to try to break a deadlock in negotiations.

The union, which represents more than 700 longshore supervisors at ports, including Vancouver, Prince Rupert and Nanaimo, has been without a contract since March last year.

The latest talks come after employers locked out workers in response to what it said was “strike activity” by union members.

The start of the lockout was then followed by several days of no engagement between the two parties, prompting federal Labour Minister Steven MacKinnon to speak with leaders on both sides, asking them to restart talks.

MacKinnon had said that the talks were “progressing at an insufficient pace, indicating a concerning absence of urgency from the parties involved” — a sentiment echoed by several business groups across Canada.

In a joint letter, more than 100 organizations, including the Canadian Chamber of Commerce, Business Council of Canada and associations representing industries from automotive and fertilizer to retail and mining, urged the government to do whatever it takes to end the work stoppage.

“While we acknowledge efforts to continue with mediation, parties have not been able to come to a negotiated agreement,” the letter says. “So, the federal government must take decisive action, using every tool at its disposal to resolve this dispute and limit the damage caused by this disruption.

“We simply cannot afford to once again put Canadian businesses at risk, which in turn puts Canadian livelihoods at risk.”

In the meantime, the union says it has filed a complaint to the Canada Industrial Relations Board against the employers, alleging the association threatened to pull existing conditions out of the last contract in direct contact with its members.

“The BCMEA is trying to undermine the union by attempting to turn members against its democratically elected leadership and bargaining committee — despite the fact that the BCMEA knows full well we received a 96 per cent mandate to take job action if needed,” union president Frank Morena said in a statement.

The employers have responded by calling the complaint “another meritless claim,” adding the final offer to the union that includes a 19.2 per cent wage increase over a four-year term remains on the table.

“The final offer has been on the table for over a week and represents a fair and balanced proposal for employees, and if accepted would end this dispute,” the employers’ statement says. “The offer does not require any concessions from the union.”

The union says the offer does not address the key issue of staffing requirement at the terminals as the port introduces more automation to cargo loading and unloading, which could potentially require fewer workers to operate than older systems.

The Port of Vancouver is the largest in Canada and has seen a number of labour disruptions, including two instances involving the rail and grain storage sectors earlier this year.

A 13-day strike by another group of workers at the port last year resulted in the disruption of a significant amount of shipping and trade.

This report by The Canadian Press was first published Nov. 9, 2024.

The Canadian Press. All rights reserved.



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The Royal Canadian Legion turns to Amazon for annual poppy campaign boost

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The Royal Canadian Legion says a new partnership with e-commerce giant Amazon is helping boost its veterans’ fund, and will hopefully expand its donor base in the digital world.

Since the Oct. 25 launch of its Amazon.ca storefront, the legion says it has received nearly 10,000 orders for poppies.

Online shoppers can order lapel poppies on Amazon in exchange for donations or buy items such as “We Remember” lawn signs, Remembrance Day pins and other accessories, with all proceeds going to the legion’s Poppy Trust Fund for Canadian veterans and their families.

Nujma Bond, the legion’s national spokesperson, said the organization sees this move as keeping up with modern purchasing habits.

“As the world around us evolves we have been looking at different ways to distribute poppies and to make it easier for people to access them,” she said in an interview.

“This is definitely a way to reach a wider number of Canadians of all ages. And certainly younger Canadians are much more active on the web, on social media in general, so we’re also engaging in that way.”

Al Plume, a member of a legion branch in Trenton, Ont., said the online store can also help with outreach to veterans who are far from home.

“For veterans that are overseas and are away, (or) can’t get to a store they can order them online, it’s Amazon.” Plume said.

Plume spent 35 years in the military with the Royal Engineers, and retired eight years ago. He said making sure veterans are looked after is his passion.

“I’ve seen the struggles that our veterans have had with Veterans Affairs … and that’s why I got involved, with making sure that the people get to them and help the veterans with their paperwork.”

But the message about the Amazon storefront didn’t appear to reach all of the legion’s locations, with volunteers at Branch 179 on Vancouver’s Commercial Drive saying they hadn’t heard about the online push.

Holly Paddon, the branch’s poppy campaign co-ordinator and bartender, said the Amazon partnership never came up in meetings with other legion volunteers and officials.

“I work at the legion, I work with the Vancouver poppy office and I go to the meetings for the Vancouver poppy campaign — which includes all the legions in Vancouver — and not once has this been mentioned,” she said.

Paddon said the initiative is a great idea, but she would like to have known more about it.

The legion also sells a larger collection of items at poppystore.ca.

This report by The Canadian Press was first published Nov. 9, 2024.

The Canadian Press. All rights reserved.



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