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Bank of Canada signals worries about inflation, but keeps rate on hold – Financial Post



If not for worries about inflation, Canada’s outlook would be almost entirely positive, though the floods in British Columbia and the new COVID-19 variant certainly raise questions about the immediate future, and “could weigh on growth by compounding supply chain disruptions and reducing demand for some services,” the Bank of Canada said.

Still, the economic impact could be fleeting. The destruction caused by the floods will reduce gross domestic product in the fourth quarter, but rebuilding efforts will provide a temporary GDP jolt in the first half of next year. Pfizer Inc. and BioNTech SE on Dec. 8 said trials suggest a third dose of their vaccine will neutralize Omicron, giving a lift to global financial markets, since the news provided a reminder that science and economies have become progressively better at adapting to new waves of COVID-19 infections.

Regardless, Canada’s economy will be confronting those headwinds at full throttle. Exports surged 6.4 per cent in October from September, to a record $56.1 billion, according to Statistics Canada on Dec. 7. The trade data followed more evidence that the country’s labour market is well on its way to the “complete” recovery Macklem has said he wants to orchestrate.

Statistics Canada on Dec. 3 said employers added 154,000 positions last month, pushing employment to where it would have been if the trend in February 2020 hadn’t been interrupted by the COVID-19 crisis. The jobless rate plunged to six per cent, a level some economists associate with full employment, a theoretical condition where everyone who wants a job has one, and additional hiring would put upward pressure on inflation.

“Recent economic indicators suggest the economy had considerable momentum into the fourth quarter,” the central bank said. “This includes broad-based job gains in recent months that have brought the employment rate essentially back to its pre-pandemic level. Job vacancies remain elevated and wage growth has also picked up.”

Mounting evidence that the recovery from the pandemic recession is secure will allow policy-makers to shift their attention to prices. A year ago, the worry was deflation, which is why the central bank dropped its benchmark interest rate to 0.25 per cent and began creating billions of dollars per week to purchase government bonds, an aggressive form of monetary policy called quantitative easing (QE). The strategy successfully staved off disinflationary forces, but timing the return to normalcy was always going to be difficult.

The Bank of Canada began by slowly tapering its bond purchases before abruptly ending the program in October as year-over-year changes in the CPI approached five per cent, well in excess of the central bank’s target of about two per cent.

Macklem, who took over from Stephen Poloz in June 2020, wasn’t around for the most intense phase of the pandemic. His contribution was to make an explicit promise to keep the benchmark interest rate near zero until at least the second half of 2022, unusual clarity for a central bank meant to give businesses and households confidence they could borrow at low rates for an extended period.

But as growth picked up, it became clear the economy wouldn’t require interest rates at an emergency setting for such a lengthy period of time. At the same time the Bank of Canada ended QE in October, it also advanced the timeline for raising interest rates by three months, rewriting the official guidance to state that increases would likely start at some point during the middle two quarters of 2022.

Macklem and his deputies repeated that commitment on Dec. 8 almost word for word. The value of the Canadian dollar fell, suggesting investors were disappointed the Bank of Canada didn’t open the door to raising rates sooner than the second quarter. “We will provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation target,” the central bank reiterated in its new statement.

Saying more would have been difficult without a new economic forecast. The Bank of Canada has made a point of tying its guidance to its quarterly outlooks; specifically, its estimate of when GDP will reach the level policy-makers associate with “full capacity,” which is essentially the maximum output policy-makers think the economy can generate without stoking inflation.

The most recent revisions prompted the October pivot, and the central bank won’t update its forecasts again until late January. The next three interest-rate announcements are scheduled for Jan. 24, March 2 and April 13. Most Bay Street economists assume the first interest-rate increase will come in April, but that will depend on the forecast the central bank generates when it runs the numbers a month from now.

“We think there’s risk that the economy reaches full capacity even sooner given rapid improvement in the labour market,” said Josh Nye, an economist at Royal Bank of Canada. “The BoC was held back by Omicron uncertainty, but today’s statement suggests that as long as that risk doesn’t intensify in the next seven weeks, the BoC will sound more hawkish in January.”

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Health Canada approves Pfizer's COVID-19 antiviral pill Paxlovid – The Globe and Mail



Paxlovid is a combination of two medications, nirmatrelvir and ritonavir, and works by stopping COVID-19 from replicating.HANDOUT/AFP/Getty Images

Health Canada approved on Monday the first oral COVID-19 medication that can prevent severe illness or death in some high-risk individuals, an important milestone that could eventually help alleviate some pressure on hospitals.

Paxlovid, an oral antiviral pill manufactured by Pfizer, is a combination of two medications, nirmatrelvir and ritonavir, and works by stopping the virus from replicating. But given global supply limits, Canada’s Chief Public Health Officer Theresa Tam said the drug “won’t be a key contributor” in efforts to counter the Omicron wave.

Federal Minister of Public Services and Procurement Filomena Tassi said Monday that Canada has received an initial shipment of 30,400 treatment courses, with another 120,000 expected before the end of March. Ontario said on Monday it expects 10,000 doses of the medication this month and that the drug will initially be available at 15 hospitals across the province.

Isaac Bogoch, an infectious-diseases physician at Toronto’s University Health Network, said the drug will likely be most beneficial over the long term to help prevent severe illness in some and keep more people out of hospital.

“COVID’s not going anywhere any time soon and it’s still phenomenal to at least have the first step forward having this [drug] out in the community where it will do good,” Dr. Bogoch said.

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Health Canada approved the drug for treatment in people who have a confirmed COVID-19 infection and have a high risk of developing severe illness requiring hospitalization, such as older Canadians who are unvaccinated or whose vaccinations are not up to date, and people with immune-compromising conditions.

Data released by Pfizer show the drug can dramatically reduce the chances of hospitalization and death in high-risk individuals. Dr. Bogoch cautioned that more research needs to be done to have a full understanding of how well the drug works in a variety of people.

Dr. Tam said the highest risk categories for Paxlovid prioritization at the outset include immunocompromised individuals, people 80 and older and people 60 and older living in remote or rural communities, living in long-term care or those from First Nations, Métis or Inuit communities whose vaccinations aren’t up to date.

Federal officials also emphasized the need to ensure good access to Paxlovid in remote and rural communities where there is less access to tertiary care centres, which handle complex patients.

The drug must be taken within five days of symptom onset, which presents a series of logistical and practical challenges. Individuals will need to see a health care provider, obtain a COVID-19 test and wait for results before getting a prescription, which can be difficult to accomplish over the course of a few days.

Dr. Tam said in a briefing Monday that some clinicians, such as those who treat people with immune-compromising health conditions, can start preparing plans for fast and efficient prescribing of Paxlovid, which could help ensure it reaches those high-risk patients in a timely manner. Pharmacies could play an important role because they are located throughout the community and don’t require an appointment.

Dr. Bogoch said he hopes officials allow the drug to be distributed from a variety of channels, including pharmacies, to help ensure it can be given to people in a timely and efficient way.

Paxlovid interacts with a number of common medications, including blood thinners, drugs used to treat seasonable allergies and treatments for some heart conditions, which means some high-risk individuals may not be able to take it.

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Canada’s First Quantum agrees to higher payments at Panama copper mine



The Panamanian unit of Canadian miner First Quantum Minerals has agreed with Panama’s government to increase royalty payments at its flagship copper mine, the company and the government said on Monday.

Minera Panama, which is majority owned by First Quantum Minerals, has agreed to pay $375 million a year to state coffers from the Cobre Panama mine, which it says is one of world’s largest copper producers.

“We accept the proposal of the national Government, while requesting that the necessary protections be provided in order to safeguard the continuity of the operation,” Minera Panama said in a statement.

The company did not immediately respond to a question about the size of the increase in royalty payments

Panama‘s government said President Laurentino Cortizo would give details of the agreement on Tuesday.

The company began negotiating a new contract with officials in September, after Cortizo promised to seek a fairer deal with better public benefits.

Toronto-based First Quantum began commercial operations at Cobre Panama, about 120 km (75 miles) west of Panama City, in 2019.

The mine contributes 3.5% of the country’s gross domestic product, according to government figures, and at full capacity can produce more than 300,000 tonnes of copper per year.


(Reporting by Elida Moreno, writing by Daina Beth Solomon, editing by Richard Pullin)

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U.N. chief urges business to help poor nations in ‘hour of need’



U.N. Secretary-General Antonio Guterres appealed to business leaders on Monday to support developing countries “in their hour of need” with access to COVID-19 vaccines, help to combat the climate crisis and reform of the global financial system.

Speaking virtually to the World Economic Forum, Guterres said: “Across all three of these areas, we need the support, the ideas, the financing and the voice of the global business community.”

He said there has been a “global inability to support developing countries in their hour of need” and warned that without immediate action inequalities and poverty would deepen, fueling more social unrest and more violence.

“We cannot afford this kind of instability,” said Guterres, who began a second five-year term as U.N. chief on Jan. 1.

He has long been pushing for more global action to address COVID-19 vaccine inequity and climate change and for reform of the global financial system.

“We need a global financial system that is fit-for-purpose. This means urgent debt restructuring and reforms of the long-term debt architecture,” Guterres said.

The World Health Organization last year set targets for 40% of people in all countries to be vaccinated against COVID-19 by the end of 2021 and 70 per cent by the middle of this year.

“We are nowhere near these targets. Vaccination rates in high-income countries are — shamefully — seven times higher than in African countries. We need vaccine equity, now,” Guterres said.

He also warned of a lopsided recovery from the pandemic with low-income countries at a huge disadvantage.

“They’re experiencing their slowest growth in a generation,” Guterres said. “The burdens of record inflation, shrinking fiscal space, high interest rates and soaring energy and food prices are hitting every corner of the world and blocking recovery — especially in low- and some middle-income countries.”


(Reporting by Michelle Nichols, Editing by Franklin Paul)

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