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Cooling inflation raises odds of Bank of Canada interest rate hold

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Inflation in Canada slowed to 3.1% in October, just above the central bank’s target range. Here is what economists say

Inflation in Canada slowed to 3.1 per cent year over year in October from 3.8 per cent the month before, leading some economists to predict an interest rate cut by the Bank of Canada as early as next spring.

The deceleration was mainly driven by gas prices, which were down 7.8 per cent from last October, Statistics Canada said on Nov. 21. Prices for food also increased at a slower pace, rising 5.4 per cent from a year ago, compared with an increase of 5.8 per cent in September.

The consumer price index (CPI) reading matched Bloomberg analyst estimates.

On a monthly basis, CPI rose 0.1 per cent in October, following a 0.1 per cent decline in September, said Statistics Canada. Seasonally adjusted, CPI fell 0.1 per cent, which BMO chief economist Douglas Porter says is “the first such decline since the opening months of the pandemic in 2020.”

“Importantly, most of the major core measures are now within or very close to the Bank of Canada’s comfort zone,” said Porter, adding the report wasn’t all good news as services inflation remains “sticky.”

Services inflation quickened to 4.6 per cent year over year from 3.9 per cent in September as prices rose for travel tours, rent and property taxes and other special charges. Rents rose 8.2 per cent from last year and municipal taxes increased 4.9 per cent, those most since 1992, said TD Economics.

This latest reading places headline CPI within striking distance of the Bank of Canada’s target range of one to three per cent.

Stephen Brown of Capital Economics predicts that inflation will drop below three per cent this month as gasoline prices continue to fall and expects it to hit the Bank’s target of two per cent by the third quarter of 2024.

Here’s what economists say about the inflation numbers, what it means for the Bank of Canada and where interest rates go from here.

Douglas Porter, BMO Economics

“While no one expected inflation to go quietly into the night, this is a generally good news step in the right direction.

“Overall, today’s result drives home the point that there is no need for further BoC tightening, especially with the economy already struggling to grow at all and underlying inflation calming. However, before the Bank can even begin seriously considering rate relief, we’ll need to see more evidence that services inflation is also moderating — that could be at least another six months down the road.”

Tu Nguyen, RSM Canada

“Looking ahead, price pressures will continue abating. Consumer spending in aggregate has plateaued, even with immigration. On a per capita basis, consumer spending has actually dropped. Households who get hit with higher mortgage payments find themselves cutting back on discretionary spending. And this is just the beginning: more mortgage terms are up for renewal at higher rates in the upcoming months.

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“The CPI report is the latest sign of a cooling economy that should make the Bank of Canada feel comfortable keeping the policy rate unchanged at the December announcement. At this point, the Bank can sit back and let the forces of monetary policy work its way through the economy, keeping inflation near three per cent.”

Alexandra Ducharme, National Bank of Canada

“Overall, although the rise in services prices in this morning’s report is not what the Bank would have liked to see, the overall trend in price pressures remains downward as signs of an economic slowdown persist.”

Housing inflation

Stephen Brown, Capital Economics

“There was good news all round in the October CPI report, with the overall CPI falling in month-on-month seasonally adjusted terms for the first time since May 2020, and the average three-month annualized change in CPI-trim and CPI-median falling to three per cent, the lowest since early 2021. With gasoline prices falling further this month and the economy already seemingly in recession, we expect headline inflation to fall to two per cent by the third quarter of next year.”

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Simon Harvey, Monex Europe and Canada

“In conjunction with data showing slack building within the labour market and growth data suggesting the economy is in a shallow recession, today’s constructive inflation report has completely undermined the BoC’s hawkish bias. This is yet another confirmatory point for our view that the BoC, having led the Fed during the hiking cycle, will once again be the pace setter in the 2024 easing cycle, with a cut likely as early as April.”

Claire Fan, RBC Economics

Details in today’s inflation report showed further moderation in domestic price pressures in Canada, extending a downside surprise in price growth in September. Not only were the readings themselves lower among many components, the scope of inflation has also continued to narrow.

“Ongoing signs of deterioration in consumer spending and labour market conditions support our outlook for inflation to keep moderating in the quarters ahead. We continue to expect the BoC is done with rate hikes, and for them to cautiously pivot to cuts over the latter half of 2024.”

Charles St-Arnaud, Alberta Central

“The continued deceleration in headline and underlying measures of inflation practically eliminated the probability of another rate increase. Nevertheless, we believe it may still be too early for the BoC to officially declare victory and signal that it is no longer considering a rate hike, especially considering the broadness of inflation and continued strong wage growth. Looking ahead, the BoC is unlikely to contemplate rate cuts until inflation has been brought sustainably below three per cent. This is unlikely to happen until the spring.”

Leslie Preston, TD Economics

“It is encouraging to see another leg down in CPI inflation in October, but the Bank of Canada will likely need to see further progress on core inflation before it feels confident that inflation is headed back to the two per cent target. There is little doubt that Canada’s economy has cooled in recent months, but the chill in inflation that should follow is proving slow to show up. We expect weaker demand in the economy will ultimately dampen price pressures, but given tightness in the labour market, it will take time.”

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Bryan Yu, Central 1 credit union

“October’s rapid downshift in inflation adds to a drumbeat of weaker economic data that should keep the Bank of Canada on the sideline at its Dec. 6 meeting. Economic data has stagnated. Gross domestic product is trending flat, with per capita GDP in outright decline, and a cooling labour market, albeit with more robust wage growth. Conditions are expected to worsen going forward as past Bank of Canada hikes continue to impact activity and mortgage renewals through 2024 further lead consumers and businesses to retrench. We expect the Bank of Canada to cut rates late in the second quarter of 2024 provided inflation continues to ease and wage growth abates.”

 

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STD epidemic slows as new syphilis and gonorrhea cases fall in US

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NEW YORK (AP) — The U.S. syphilis epidemic slowed dramatically last year, gonorrhea cases fell and chlamydia cases remained below prepandemic levels, according to federal data released Tuesday.

The numbers represented some good news about sexually transmitted diseases, which experienced some alarming increases in past years due to declining condom use, inadequate sex education, and reduced testing and treatment when the COVID-19 pandemic hit.

Last year, cases of the most infectious stages of syphilis fell 10% from the year before — the first substantial decline in more than two decades. Gonorrhea cases dropped 7%, marking a second straight year of decline and bringing the number below what it was in 2019.

“I’m encouraged, and it’s been a long time since I felt that way” about the nation’s epidemic of sexually transmitted infections, said the CDC’s Dr. Jonathan Mermin. “Something is working.”

More than 2.4 million cases of syphilis, gonorrhea and chlamydia were diagnosed and reported last year — 1.6 million cases of chlamydia, 600,000 of gonorrhea, and more than 209,000 of syphilis.

Syphilis is a particular concern. For centuries, it was a common but feared infection that could deform the body and end in death. New cases plummeted in the U.S. starting in the 1940s when infection-fighting antibiotics became widely available, and they trended down for a half century after that. By 2002, however, cases began rising again, with men who have sex with other men being disproportionately affected.

The new report found cases of syphilis in their early, most infectious stages dropped 13% among gay and bisexual men. It was the first such drop since the agency began reporting data for that group in the mid-2000s.

However, there was a 12% increase in the rate of cases of unknown- or later-stage syphilis — a reflection of people infected years ago.

Cases of syphilis in newborns, passed on from infected mothers, also rose. There were nearly 4,000 cases, including 279 stillbirths and infant deaths.

“This means pregnant women are not being tested often enough,” said Dr. Jeffrey Klausner, a professor of medicine at the University of Southern California.

What caused some of the STD trends to improve? Several experts say one contributor is the growing use of an antibiotic as a “morning-after pill.” Studies have shown that taking doxycycline within 72 hours of unprotected sex cuts the risk of developing syphilis, gonorrhea and chlamydia.

In June, the CDC started recommending doxycycline as a morning-after pill, specifically for gay and bisexual men and transgender women who recently had an STD diagnosis. But health departments and organizations in some cities had been giving the pills to people for a couple years.

Some experts believe that the 2022 mpox outbreak — which mainly hit gay and bisexual men — may have had a lingering effect on sexual behavior in 2023, or at least on people’s willingness to get tested when strange sores appeared.

Another factor may have been an increase in the number of health workers testing people for infections, doing contact tracing and connecting people to treatment. Congress gave $1.2 billion to expand the workforce over five years, including $600 million to states, cities and territories that get STD prevention funding from CDC.

Last year had the “most activity with that funding throughout the U.S.,” said David Harvey, executive director of the National Coalition of STD Directors.

However, Congress ended the funds early as a part of last year’s debt ceiling deal, cutting off $400 million. Some people already have lost their jobs, said a spokeswoman for Harvey’s organization.

Still, Harvey said he had reasons for optimism, including the growing use of doxycycline and a push for at-home STD test kits.

Also, there are reasons to think the next presidential administration could get behind STD prevention. In 2019, then-President Donald Trump announced a campaign to “eliminate” the U.S. HIV epidemic by 2030. (Federal health officials later clarified that the actual goal was a huge reduction in new infections — fewer than 3,000 a year.)

There were nearly 32,000 new HIV infections in 2022, the CDC estimates. But a boost in public health funding for HIV could also also help bring down other sexually transmitted infections, experts said.

“When the government puts in resources, puts in money, we see declines in STDs,” Klausner said.

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The Associated Press Health and Science Department receives support from the Howard Hughes Medical Institute’s Science and Educational Media Group. The AP is solely responsible for all content.

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World’s largest active volcano Mauna Loa showed telltale warning signs before erupting in 2022

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WASHINGTON (AP) — Scientists can’t know precisely when a volcano is about to erupt, but they can sometimes pick up telltale signs.

That happened two years ago with the world’s largest active volcano. About two months before Mauna Loa spewed rivers of glowing orange molten lava, geologists detected small earthquakes nearby and other signs, and they warned residents on Hawaii‘s Big Island.

Now a study of the volcano’s lava confirms their timeline for when the molten rock below was on the move.

“Volcanoes are tricky because we don’t get to watch directly what’s happening inside – we have to look for other signs,” said Erik Klemetti Gonzalez, a volcano expert at Denison University, who was not involved in the study.

Upswelling ground and increased earthquake activity near the volcano resulted from magma rising from lower levels of Earth’s crust to fill chambers beneath the volcano, said Kendra Lynn, a research geologist at the Hawaiian Volcano Observatory and co-author of a new study in Nature Communications.

When pressure was high enough, the magma broke through brittle surface rock and became lava – and the eruption began in late November 2022. Later, researchers collected samples of volcanic rock for analysis.

The chemical makeup of certain crystals within the lava indicated that around 70 days before the eruption, large quantities of molten rock had moved from around 1.9 miles (3 kilometers) to 3 miles (5 kilometers) under the summit to a mile (2 kilometers) or less beneath, the study found. This matched the timeline the geologists had observed with other signs.

The last time Mauna Loa erupted was in 1984. Most of the U.S. volcanoes that scientists consider to be active are found in Hawaii, Alaska and the West Coast.

Worldwide, around 585 volcanoes are considered active.

Scientists can’t predict eruptions, but they can make a “forecast,” said Ben Andrews, who heads the global volcano program at the Smithsonian Institution and who was not involved in the study.

Andrews compared volcano forecasts to weather forecasts – informed “probabilities” that an event will occur. And better data about the past behavior of specific volcanos can help researchers finetune forecasts of future activity, experts say.

(asterisk)We can look for similar patterns in the future and expect that there’s a higher probability of conditions for an eruption happening,” said Klemetti Gonzalez.

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The Associated Press Health and Science Department receives support from the Howard Hughes Medical Institute’s Science and Educational Media Group. The AP is solely responsible for all content.

The Canadian Press. All rights reserved.

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Waymo’s robotaxis now open to anyone who wants a driverless ride in Los Angeles

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Waymo on Tuesday opened its robotaxi service to anyone who wants a ride around Los Angeles, marking another milestone in the evolution of self-driving car technology since the company began as a secret project at Google 15 years ago.

The expansion comes eight months after Waymo began offering rides in Los Angeles to a limited group of passengers chosen from a waiting list that had ballooned to more than 300,000 people. Now, anyone with the Waymo One smartphone app will be able to request a ride around an 80-square-mile (129-square-kilometer) territory spanning the second largest U.S. city.

After Waymo received approval from California regulators to charge for rides 15 months ago, the company initially chose to launch its operations in San Francisco before offering a limited service in Los Angeles.

Before deciding to compete against conventional ride-hailing pioneers Uber and Lyft in California, Waymo unleashed its robotaxis in Phoenix in 2020 and has been steadily extending the reach of its service in that Arizona city ever since.

Driverless rides are proving to be more than just a novelty. Waymo says it now transports more than 50,000 weekly passengers in its robotaxis, a volume of business numbers that helped the company recently raise $5.6 billion from its corporate parent Alphabet and a list of other investors that included venture capital firm Andreesen Horowitz and financial management firm T. Rowe Price.

“Our service has matured quickly and our riders are embracing the many benefits of fully autonomous driving,” Waymo co-CEO Tekedra Mawakana said in a blog post.

Despite its inroads, Waymo is still believed to be losing money. Although Alphabet doesn’t disclose Waymo’s financial results, the robotaxi is a major part of an “Other Bets” division that had suffered an operating loss of $3.3 billion through the first nine months of this year, down from a setback of $4.2 billion at the same time last year.

But Waymo has come a long way since Google began working on self-driving cars in 2009 as part of project “Chauffeur.” Since its 2016 spinoff from Google, Waymo has established itself as the clear leader in a robotaxi industry that’s getting more congested.

Electric auto pioneer Tesla is aiming to launch a rival “Cybercab” service by 2026, although its CEO Elon Musk said he hopes the company can get the required regulatory clearances to operate in Texas and California by next year.

Tesla’s projected timeline for competing against Waymo has been met with skepticism because Musk has made unfulfilled promises about the company’s self-driving car technology for nearly a decade.

Meanwhile, Waymo’s robotaxis have driven more than 20 million fully autonomous miles and provided more than 2 million rides to passengers without encountering a serious accident that resulted in its operations being sidelined.

That safety record is a stark contrast to one of its early rivals, Cruise, a robotaxi service owned by General Motors. Cruise’s California license was suspended last year after one of its driverless cars in San Francisco dragged a jaywalking pedestrian who had been struck by a different car driven by a human.

Cruise is now trying to rebound by joining forces with Uber to make some of its services available next year in U.S. cities that still haven’t been announced. But Waymo also has forged a similar alliance with Uber to dispatch its robotaxi in Atlanta and Austin, Texas next year.

Another robotaxi service, Amazon’s Zoox, is hoping to begin offering driverless rides to the general public in Las Vegas at some point next year before also launching in San Francisco.

The Canadian Press. All rights reserved.

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