Bank of Canada Governor Tiff Macklem takes part in a press conference in Ottawa on Oct. 25. Mr. Macklem said Wednesday that tight monetary policy is working to cool demand in the economy.PATRICK DOYLE/Reuters
Bank of Canada Governor Tiff Macklem said borrowing costs may now be “restrictive enough” to get inflation under control, his most explicit comments to date suggesting that interest rates have peaked.
Speaking to the Saint John Region Chamber of Commerce on Wednesday, Mr. Macklem said that tight monetary policy is working to cool demand in the economy and that the central bank expects economic activity in Canada to be weak for the next few quarters.
That “means more downward pressure on inflation is in the pipeline,” he said in his first speech since holding the bank’s policy rate steady on Oct. 25. “In short, the excess demand in the economy that made it too easy to raise prices is now gone.”
Mr. Macklem did not rule out further rate hikes if inflation proves more stubborn than expected, and said that the bank needs to “stay the course.” But his remarks seemed to reinforce market and analyst expectations that the central bank is done tightening monetary policy, and that the key question now is when the bank will begin cutting rates.
A day earlier, Statistics Canada reported a significant drop in inflation. Annual Consumer Price Index growth declined to 3.1 per cent in October from 3.8 per cent in September. That puts the inflation rate only slightly above the upper end of the Bank of Canada’s inflation control band of 1 per cent to 3 per cent. It formally targets 2-per-cent inflation.
In a press conference after the speech, Mr. Macklem was asked whether the federal government’s fall economic statement, published Tuesday, would help or hinder the bank’s fight with inflation. He had previously said that monetary policy and fiscal policy were not “rowing” in the same direction.
“From the perspective of monetary policy, the fall economic statement suggests that the government is not adding new or additional inflationary pressures over the next couple of years, which is the critical period over which we will be looking to reduce inflation and get it back to the target,” Mr. Macklem said.
He added that the government’s new commitment to keep budget deficits under 1 per cent of gross domestic product, starting in the 2026-27 fiscal year, is “helpful.”
The fall economic statement showed Ottawa’s deficit for the current fiscal year was essentially unchanged since the spring budget, despite the government announcing an additional $20.4-billion in spending over the next six years. Expected deficits in the next few years were revised up by an average of $7-billion, although this mostly reflects higher debt-servicing costs and slower revenue growth.
The bank has raised interest rates 10 times since March, 2022, to deal with inflation, lifting its policy rate from 0.25 per cent to 5 per cent, the highest level in more than two decades. Mr. Macklem and his team have left rates unchanged for the past two interest-rate decisions. The next rate announcement is on Dec. 6.
Most private-sector economists believe that the Bank of Canada has finished tightening monetary policy. Many are betting it will start lowering rates around the middle of next year.
“The confirmation that the governor believes that rates are high enough to return inflation to 2 per cent is clearly dovish,” Royce Mendes, head of macro strategy at Desjardins, wrote in a note to clients about the speech.
“Our view is that further economic weakness will be seen over the remainder of this year and early in 2024.” he wrote. “That will be enough to prompt rate cuts in the second quarter of 2024.”
Growth in Canada’s gross domestic product has essentially flatlined since the spring, and the unemployment rate has moved up to 5.7 per cent from a low of 4.9 per cent last year. Statistics Canada will publish third-quarter GDP numbers next week.
Mr. Macklem said it’s too early to be talking about rate cuts. But he said the bank could start lowering rates before inflation reaches 2 per cent. That’s because monetary policy is forward-looking, and interest-rate changes take many quarters to have an impact.
Before contemplating rate cuts, the bank will need to see a sustained decline in core-inflation measures, which strip out the most volatile price movements, Mr. Macklem said. He noted that core inflation moved lower in October, but that “one month is not a trend.” The bank is also looking to see a fall in short-term inflation expectations and a slowdown in wage growth.
Much of the speech focused on the pain of high inflation, and why Canadians have such a grim view of the economy despite a strong labour market.
“People are working hard, but their salaries don’t buy what they used to. They can’t afford the things they need to live. It feels unfair. That feeling of unfairness eats away at the fabric of society,” he said.
This happened in the high-inflation period of the 1970s. At that time, it took much higher interest rates than today, and a painful recession, to break the back of inflation. Mr. Macklem said he was hopeful that this won’t be necessary today. The central bank acted more forcefully this time around, he said, and inflation expectations remain better anchored than in the 1970s.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
