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Bank of Canada raises rate again to 4.25% — but opens door to staying there

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The Bank of Canada raised its benchmark interest rate by 50 basis points, to 4.25 per cent.

The move was widely expected by economists, who were anticipating a rate hike of either 25 or 50 points.

Canada’s central bank has raised its rate seven times this year in its fight to wrestle inflation into submission. In the process, the bank has taken its rate from 0.25 per cent to 4.25 per cent.

That’s had a huge impact on the rates that Canadian consumers and businesses get from their banks on things like savings accounts and mortgages.

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In previous rate hikes, the bank made it clear that it would continue to raise its trend-setting rate until inflation came back to within the range of up to three per cent that it targets. As recently as October, the bank was saying it “expects” that rates will have to go even higher.

The month before, they said they “still judge” that rates would have to go higher. Even after announcing its biggest rate hike ever, of a full percentage point in July, the bank was saying it “continues to judge that interest rates will need to rise further.”

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But Wednesday’s statement accompanying the rate decision was a clear departure from that tone, as the language shifted to a more neutral, wait-and-see approach.

The bank and its policy makers “will be considering” whether or not the rate has to go higher in order to bring supply and demand back into balance and return inflation to target, the bank said Wednesday.

For economist Royce Mendes at Desjardins, that’s a clear pivot. “Upcoming readings on the labour market, inflation and the central bank’s own surveys will dictate whether there’s more to come,” he said. “We now expect central bankers to officially communicate a pause at their January announcement, when they will have a fresh set of forecasts in hand.”

 

Rate hikes gobble up every penny of household spending

 

Rabia Shumayal of Mississauga, Ont. has seen her mortgage rate go from 1.9% to above 5% this year, which has forced her to cut out basically all other spending for her family.

Stopping the barrage of rate hikes is long overdue for people like Rabia Shumayal. She and her husband bought a home in Mississauga, Ont., during the pandemic, a decision she says she has since come to regret because of the rapid escalation in her mortgage costs.

“If they keep increasing the interest rate at this rate, I don’t know how I’m going to afford [my mortage] bill,” she told CBC News in an interview.

Skyrocketing payments

On the advice of her mortgage broker and others, she opted for a variable rate loan.

Her initial rate was 1.92 per cent, which resulted in a monthly payment well within her family budget. But rates have skyrocketed to more than five per cent since then, causing her mortgage payment to balloon to the point where it gobbles up every spare cent the family has, she said — and then some.

“My kids don’t have any extracurriculars because I can’t afford it,” she said. “Every single penny is going toward the mortgage.”

She bristles at suggestions that families can beat inflation by cutting back on expenses, such as the recent quip by federal Finance Minister Chrystia Freeland that families should consider cancelling their subscriptions to Disney+.

“I already don’t have one of those things,” Shumayal says. “And even if I had those, how would getting rid of $30 make up for $1,000 of an escalation of an interest rate?”

While she’s glad to have a home for her children, she’s angry that the bank seems committed to raising rates and punishing families like hers, despite the bank’s infamous 2020 pledge that “interest rates are going to be low for a long time.”

“I should punch myself on that decision,” she says. “Why did I listen to all these people?”

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Northwest Territories releases fiscal year 2023-2024 budget

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Northwest Territories releases fiscal year 2023-2024 budget

The Northwest Territories government released its new budget Wednesday, the last before the territorial election set for the fall.

Finance Minister Caroline Wawzonek said the plan aims to maintain the stability of the territory’s economy during times of “volatility and uncertainty” without reducing services and programs.

“I am confident that we are leaving the next assembly with a fiscally sustainable foundation on which to build,” she said.

The proposed $2.2-billion budget forecasts the territory will have an operating surplus of nearly $178 million. It projects revenue to increase by 2.9 per cent, largely due to an increase in federal transfers, while spending will increase by $187 million or 7.3 per cent compared to the previous budget.

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Wawzonek said initiatives to address the rising cost of living in the North include increasing student financial assistance, improved income assistance for seniors and people with disabilities, and support for non-government organizations.

“Students, seniors, the non-profit sector, these are areas where we can have a real impact and hopefully help mitigate the impacts of inflation,” she said.

Increased spending in the budget is to include $82 million for mandate priorities and enhancements to existing programs, as well as $62 million to cover the costs of flooding in 2022. Thousands of residents in Hay River and the nearby K’atl’odeeche First Nation reserve were ordered to evacuate their homes due to the worst flooding on record in May.

Other budget highlights include $10.9 million for the transition from the pandemic to endemic stage of COVID-19, $10.1 million to help recruit and retain front-line health-care workers, $10.3 million for the territory’s $10-a-day child-care agreement with the federal government, $8.3 million to help offset the effects of the increased carbon tax, and $4 million for core Northwest Territories Housing Corporation programs.

The budget also proposes $833,000 for community governments and $89,000 for the Deline Goti’ne Government to reach the territory’s goal of reducing its municipal funding gap by $5 million between 2019 and 2023.

The N.W.T. government is not proposing any new taxes, but property taxes are expected to increase due to inflation. The territory also plans to change its carbon tax system to align with new federal requirements.

The federal government announced in August 2021 it would increase the carbon price by $15 per tonne of carbon dioxide equivalent emissions annually, starting at $65 a tonne beginning in April and rising to $170 a tonne by 2030. It is also prohibiting rebates that directly offset the carbon tax. In response, the N.W.T. plans to adjust its carbon tax rates, replace its heating fuel rebate by increasing its cost of living offset, and replace a carbon tax rebate for large emitters with a rebate tied to a facility-specific baseline.

Some legislature members have expressed concern with the plan as heating costs are high in the North, especially in the Arctic, and many communities are reliant on diesel.

Wawzonek said if the proposed changes aren’t passed by the legislature, the federal government will determine how to return revenue to the N.W.T.

The territory projects borrowing will increase by 4.5 per cent, bringing its total debt to about $1.5 billion, which it said is well below the federally imposed limit of $1.8 billion.

When the previous budget was tabled a year ago, the territory expected its total debt to increase to more than $1.6 billion by the end of the fiscal year. In October, however, the territory revised its capital estimates or the amount of money it expected to spend on infrastructure, to better reflect the territory’s capacity to complete projects, reducing spending from more than $500 million to a cap of $260 million.

The territory’s 2022-2023 $2.1-billion budget saw a 2.3 per cent increase in spending compared to 2021-2022.

Wawzonek touted that budget as a sustainable plan, promising to not cut programming or add new taxes while limiting new spending.

While the budget was passed in April 2022, several legislature members opposed the plan, criticizing limited spending on communities outside of Yellowknife.

Wawzonek said at a news conference Wednesday that she suspects there may be similar criticisms of the new budget.

She said, however, that she believes the budget can respond to those concerns, adding she has had discussions with legislature members about what they wanted to see in it.

“I think we as a collective 19 are getting a little better at doing that,” she said.

“I actually think this is maybe going to be the best year for the consensus-style approach to passing a budget.”

This report by The Canadian Press was first published Feb. 8, 2023.

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This story was produced with the financial assistance of the Meta and Canadian Press News Fellowship.

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Driver charged with first-degree murder in Quebec daycare bus attack that killed two

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Quebec daycare bus attack

The driver of a bus that crashed into a suburban Montreal daycare this morning, killing two children, has been charged with two counts of first-degree murder.

Pierre Ny St-Amand, 51, appeared by video late this afternoon from a hospital room and will remain detained

Court documents show he faces a total of nine charges, including attempted murder, aggravated assault and assault causing bodily harm.

Six other children were injured and transported to hospitals in Laval and Montreal, but doctors said their lives were not in danger.

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At around 8:30 a.m., a Société de transport de Laval bus crashed into the daycare building, which sits at the end of a driveway a significant distance from the nearest bus route.

Witnesses who rushed to the scene said they had to subdue the driver, who seemed to be delirious and removed his clothing after getting off the bus.

This report by The Canadian Press was first published Feb. 8, 2023.

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Canadian assessment team deployed to Turkey after earthquake

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Canadian assessment team deployed to Turkey

A senior government official says a Canadian assessment team is on its way to Turkey to determine how Canada can contribute to earthquake relief efforts.

International Development Minister Harjit Sajjan was expected to formally announce the deployment of the Canadian Disaster Assessment Team this evening.

The senior official, who spoke on background pending Sajjan’s official confirmation, said the team consists of a handful of military and Global Affairs officials.

The official underscored that the deployment of the team does not automatically guarantee a further deployment of Canadian resources to the country.

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The earthquake, which razed thousands of buildings in Turkey and Syria on Monday, is one of the deadliest quakes worldwide in more than a decade and the federal government is facing criticism that the window to help with rescue efforts is closing.

Search teams from more than two dozen countries have joined tens of thousands of local emergency personnel and Canadian humanitarian aid workers with charitable organizations were arriving Wednesday

Defence Minister Anita Anand said late Tuesday that the federal government had not ruled out sending a Disaster Assistance Response Team, to help with the recovery effort, but that it was working to figure out what would be most useful.

The assessment team would recommend whether to send additional support, such as a DART.

Earlier Wednesday, Prime Minister Justin Trudeau announced the federal government would match funds donated to Canadian Red Cross relief efforts up to $10 million on top of an initial aid package of $10 million.

This report by The Canadian Press was first published Feb. 8, 2023.

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