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Bank of Canada's inflation mandate renewed: Economists react – BNN

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Prime Minister Justin Trudeau’s government announced on Monday that it will renew the Bank of Canada’s 2 per cent inflation target, while adding language that will give the central bank more flexibility to overshoot the target in order to achieve employment objectives. 

Here are some reactions from economists and analysts:

  • Doug Porter, chief economist at the Bank of Montreal, by email: “The very heavy emphasis on employment was notable, as was the sense that low-for-long will sometimes be needed to meet goals. Overall, it struck us as a tad more dovish than generally expected.”
  • Jimmy Jean, chief economist at Desjardins Securities Inc., by email: “It adds a bit of a concreteness to the idea of leaning on favoring max employment, especially the option to adjust the 1-3 per cent range as warranted. But I’m expecting these adjustments to be fairly rare and perhaps more likely in a context where we’re recovering from a real recession.”
  • Jean-Francois Perrault, chief economist at Bank of Nova Scotia, by email: “I do think an explicit call out to maximum sustainable employment goes beyond the informal approach of the past in part because it will be very difficult to conclude that we are at that maximum level at any given point in time. It also risks making things awkward between the Bank of Canada and the government.”

What Bloomberg Economics Says…
“Over the short term, the renewal points to a patient approach to tightening, much like the framework change the Federal Reserve made in 2020. However, patience is not unlimited, and it would be a mistake to think recent inflation rates near 5 per cent represent what the BoC will tolerate in search of better job-market outcomes”
— Andrew Husby, economist

  • Sri Thanabalasingam, senior economist at Toronto-Dominion Bank, by email: “I thought it was mostly a continuation of the current framework from a Bank of Canada perspective. The consideration of labor market indicators and the use of the inflation target range are things the bank was already incorporating in its policy making. Today, we saw a confirmation of that in writing. That said, by explicitly having labor market considerations in the mandate, it may result in more accommodative monetary policy in the future.”
  • Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, by email: “It’s clear that the inflation target takes priority over other considerations, and that while the mandate has some flexibility, that is only within the constraints of keeping inflation expectations grounded at 2 per cent. The new language will not have any material impact on decisions in 2022, since the economy has actually made better progress on employment than it has on GDP, and has already had an extended ‘low for long’ period in monetary policy to ensure that it is truly lifting off before the first hikes come.”
  • Simon Deeley, director of Canada rates strategy at RBC Dominion Securities Inc., in a report to investors: “While we agree that the BoC has had — and used — the flexibility in its framework in the past, the changes are nevertheless important. The lower-for-longer component hints at average inflation targeting and the specific employment considerations in certain situations incorporates elements of a dual mandate. Indeed, the BoC notes in the full renewal piece that it is adding the positive elements of both policies, while avoiding the negative aspects by emphasizing the inflation target — and anchored inflation expectations — as the over-arching objective.”
  • Josh Nye, an economist at Royal Bank of Canada, by email: “It seems pretty much as expected an in line with your reporting from last week. The decision to maintain a 2 per cent midpoint inflation target within the 1-3 per cent control band is status quo, and the language around maximum sustainable employment (as what I would call a secondary objective) is largely as expected.”
  • Stephen Gordon, economics professor at Universite Laval, by Twitter: “Gotta admit I don’t like the fact that that we all think the BoC mandate is something that requires interpreting.”

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

Companies in this story: (TSX:T)

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

The Canadian Press. All rights reserved.

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

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