Canada’s trailblazing central bank is likely to cut its bond-buying program again this year, possibly as soon as July, as provinces ease curbs to contain the coronavirus pandemic and inflation pressures build, analysts said.
Strategists from half of Canada’s six largest banks expect the Bank of Canada to dial back its bond purchases to C$2 billion ($1.65 billion) per week or less – from the current level of C$3 billion per week – at the central bank’s July policy announcement, while the remainder see a reduction in October.
By April next year or earlier, purchases are likely to be C$1 billion per week or less, and continue for some time to offset the amount of bonds maturing on the central bank’s balance sheet, the analysts said this week.
In April, the BoC became the first major central bank to cut back on pandemic-era money-printing stimulus programs and signaled it could begin raising its key interest rate from the current floor of 0.25% in the second half of next year.
It said further cuts to bond purchases would be guided by its assessment of the “strength and durability” of economic recovery.
“When we get to July we will be presumably through these third-wave lockdowns and the economy looks to be further along its path towards full recovery,” said Andrew Kelvin, chief Canada strategist at TD Securities. That would imply “just a little bit less support from the BoC is needed,” he added.
In recent days, Quebec, British Columbia and Ontario, Canada’s three most populous provinces, have announced plans to ease restrictions.
Despite lockdowns, Canadian inflation rose in April at the fastest annual pace in a decade, moving above the top of the BoC’s target range of 1% to 3%. While that could be put down to a comparison with weak prices one year ago, not so for a monthly rise that was hotter than expected.
The central bank is due to have in hand the May inflation report as well as quarterly business and household surveys before its July meeting.
The surveys are likely “to further reinforce upside pressure on consumers’ and businesses’ inflation expectations,” said Derek Holt, vice president of capital markets economics at Scotiabank.
The U.S. Federal Reserve has not signaled it is ready to dial back quantitative easing but that may not deter the BoC.
Canada’s economy is “importing some easing from the Fed,” Kelvin said. “The more QE that the Federal Reserve does, the less QE the BoC needs to do.”
($1 = 1.2108 Canadian dollars)
(Reporting by Fergal Smith; Editing by Richard Chang)
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
