Bank of Canada Governor Tiff Macklem indicated the future path of interest-rate increases will depend in part on whether the nation’s businesses ramp up investment as the economy emerges from the pandemic.
In a speech two weeks after holding rates at emergency lows, Macklem promised Wednesday he would “act deliberately and communicate clearly” as he begins to raise borrowing costs. But he made clear that businesses have a role in determining how smooth the process will be.
“Productivity growth is vital to non-inflationary growth and rising standards of living,” Macklem said, in prepared remarks of his speech to the Canadian Chamber of Commerce. “At a time when inflation is already well above our target, this is more vital than ever.”
At its Jan. 26 policy decision, the Bank of Canada said it would be raising borrowing costs soon to cool inflation. Markets are fully pricing in a hike at the central bank’s next decision on March 2, with as many as six more priced in over the next year.
The comments are consistent with testimony Macklem gave to lawmakers in the Senate last week when he said the rate path will hinge in part on business investment. The Canadian dollar was little changed after the speech, up 0.3 per cent to CUS$1.267 per U.S. dollar at 12:37 p.m. in Toronto trading.
At a press conference after the speech, Macklem said the Bank of Canada won’t be on “autopilot” as it raises interest rates, and policy makers will gauge the appropriateness of policy settings “at each point.” He said that all else being equal, the less business investment there is, the higher interest rates will need to go.
The governor noted, however, that the bank won’t have a good understanding how high borrowing costs will need to rise until the process begins. “We’re going to see how the economy reacts to higher interest rates,” Macklem said.
In the speech, Macklem said the surge in demand for goods during the pandemic is responsible for much of the pick-up in prices, and those forces should fade enough to bring inflation back down to about 3 per cent by the end of this year. In December, consumer price gains hit 4.8 per cent, the highest in three decades.
The higher inflation “is not the result of generalized excess demand in the Canadian economy,” Macklem said. “Our economy is only just now getting back to full capacity.”
Higher interest rates, however, are needed to bring inflation back to the central bank’s 2 per cent target. Macklem sought to reassure the business community that the central bank is committed to that goal.
“As businesses set prices and wages, firms and workers alike can be assured that the Bank of Canada will use its monetary tools to control inflation,” he said.
Macklem also provided some of the underlying thinking behind the Bank of Canada’s latest economic projections, which include an assumption the nation will be able to produce strong growth over the next two years without stoking inflation. That’s because the bank is expecting a rebound in lagging business investment numbers, Macklem said.
While Canadian corporate spending has lagged the U.S. during the pandemic, it’s expected to accelerate as the country’s COVID-19 containment restrictions are lifted, Macklem said.
“Indeed, we expect that business investment will grow faster in Canada than in the United States,” he said. “It’s imperative that businesses in Canada follow through on these plans or risk losing out to US competitors.”
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Air Canada to reduce flights this summer amid 'customer service shortfalls' – CTV News
Air Canada is planning to reduce its flights in July and August, according to a statement from the company’s president, as the airline continues to deal with “customer service shortfalls.”
“Regrettably, things are not business as usual in our industry globally, and this is affecting our operations and our ability to serve you with our normal standards of care,” Michael Rousseau wrote.
The airline will be reducing its capacity as summer travel comes to a peak and pandemic-related restrictions on travel continue to lift.
In an emailed statement to CTV News Channel, an Air Canada spokesperson said the company will be reducing its schedule by an average of 154 flights per day for July and August. Prior to this change, Air Canada said it was operating around 1,000 flights per day. The routes most affected are flights to and from Toronto and Montreal airports. The changes will reduce the frequency of these flights, and will primarily affect evening and late-night flights on the airline’s smaller aircraft.
The spokesperson also said the airline will be temporarily suspending routes between Montreal and Pittsburgh, Baltimore and Kelowna, and Toronto and Fort McMurray. International flights will remain mostly unaffected, except for timing changes that the spokesperson said would reduce flying at peak times.
“To bring about the level of operational stability we need, with reluctance, we are now making meaningful reductions to our schedule in July and August in order to reduce passenger volumes and flows to a level we believe the air transport system can accommodate,” the statement reads.
While Rousseau acknowledges this will have a “negative impact on some customers,” he said he hopes giving this notice to the public of the airline’s reduced schedule will allow travellers to make other arrangements.
“We are convinced these changes will bring about the improvements we have targeted,” he said. “But to set expectations, it should also be understood the real benefits of this action will take time and be felt only gradually as the industry regains the reliability and robustness it had attained prior to the pandemic.”
Recent data shows that as we head into the summer travel season, more than half of all flights in and out of some of Canada’s major airports are being cancelled or delayed as the tourism and airline sectors continue to face staffing shortages.
On Wednesday, the CEO of the Montreal-Trudeau Airport – where Air Canada said it would be reducing some of its flights – told CTV News Montreal that the airport was already in discussions with airlines to reduce the number of flights.
“We’re having discussions and it’s likely the frequencies — the number of flights we’ll have on a given destination — or destinations themselves,” Philippe Rainville said, adding that a staffing shortage at the airport is causing issues, most notably in loading and unloading luggage from planes.
Toronto Pearson International Airport is experiencing similar issues, with videos circulating on social media appearing to depict hundreds of pieces of luggage piled up in the baggage claim area.
“I have had conversations with the four largest airports and the two largest airlines just on Thursday and I will be having follow up conversations with them soon,” Transport Minister Omar Alghabra said at a press conference on Wednesday. “They know that they need to add more resources and they are working on that and we are offering our support to address these issues. But these are unacceptable issues.”
Airline and airport workers say some of the big reasons behind the struggle to address the industry’s staffing shortage are that they’re not being treated well, and their pay is not sufficient for how difficult the job is.
“There are so many screening officers that have quit because of low pay and poor working conditions that the airports are severely understaffed,” David Lipton, representative of the United Steelworkers union in Ottawa, told CTV National News on June 19.
Lipton said some unions are offering screening staff hundreds of dollars a week if they don’t take a vacation or sick days.
With files from CTV News Montreal, CTV News Toronto, and Alexandra Mae Jones
Accounting firm EY to pay $100M US fine after auditors caught cheating on ethics exams – CBC News
Accounting firm Ernst & Young will pay $100 million US to settle U.S. Securities and Exchange Commission (SEC) charges that its auditors cheated on certified public accounting (CPA) exams and that it misled the agency’s investigators.
The London-based auditor admitted to the charges and agreed to pay what the SEC said is its largest fine against an auditor.
“EY acknowledges the findings determined by the SEC,” said Brendan Mullin, EY media relations director, adding that the firm’s response has been “thorough, extensive and effective.”
“At EY, nothing is more important than our integrity and our ethics.”
The CPA is the key qualification for accountants in the United States.
EY has also agreed to “undertake extensive remedial measures to fix the firm’s ethical issues,” the SEC said.
49 people got test answers ahead of time
The Wall Street watchdog found that 49 EY professionals “obtained or circulated” answer keys to CPA licence exams, while hundreds of others cheated to complete the continuing professional education components relating to CPA ethics.
“This action involves breaches of trust by gatekeepers … entrusted to audit many of our nation’s public companies. It’s simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams,” said Gurbir Grewal, the SEC’s enforcement director, in a statement.
“And it’s equally shocking that Ernst & Young hindered our investigation of this misconduct,” added Grewal.
EY submitted to the SEC that it did not have issues with cheating when, in fact, the firm had been informed of potential cheating on a CPA ethics exam by a member of staff, the SEC said.
It added that EY admitted it did not correct its submission even after an internal EY investigation confirmed there had been cheating, and even after its senior lawyers discussed the matter with the firm’s senior management.
The SEC’s order also finds that EY violated a Public Company Accounting Oversight Board (PCAOB) rule requiring the firm to maintain integrity in the performance of a professional service.
The SEC has ordered EY to retain two independent consultants to help remediate its deficiencies. One will review the firm’s policies and procedures relating to ethics and integrity. The other will review EY’s conduct regarding its disclosure failures, including whether any EY employees contributed to the firm’s failure to correct its misleading submission, the SEC said.
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