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Democrats Say Fed Risks Economic Harm, Showing Unease With Hikes

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(Bloomberg) — The Federal Reserve’s latest rate increase drew rebukes from Senator Elizabeth Warren, Senate Majority Leader Chuck Schumer and a senior House Democrat on Wednesday, showing the party’s anxiety about a potential recession before the 2024 presidential election.

“The Fed under Chair Powell made a mistake not pausing its extreme interest rate hikes,” Warren said in a tweet, after the Fed bumped its benchmark rate a quarter-point and indicated further tightening was possible.

“I’m concerned about its effect on the economy,” Schumer said of the latest increase.

Representative Brendan Boyle of Pennsylvania, the senior Democrat on the House Budget Committee, warned that “raising rates too high and too fast — especially in this moment — could jeopardize the record recovery Americans have enjoyed under President Biden.”

Read more: Powell Stresses Commitment to Cooling Prices as Fed Hikes Rates

In a statement, he cited the “precarious state of our financial system and market volatility,” a reference to the banking crisis that’s consumed markets and governments around the world for the past two weeks.

Lawmakers of both parties are typically reticent to criticize the Fed, recognizing that the central bank’s independence from politics is crucial to its credibility. There have been exceptions, notably President Donald Trump — who never shied from publicly telling the Fed what he thought it should do — and Warren, the Massachusetts liberal who had already criticized Fed rate increases.

White House Press Secretary Karine Jean-Pierre said Wednesday that she wouldn’t comment on the Fed’s decision.

“We want to make sure, the president wants to make sure, that we give them the space, give the Fed the space needed to make their decisions on monetary policy,” she said.

Boyle’s tone has shifted since January, when he issued a statement calling the Fed’s quarter-point increase that month “a notable slowdown in the pace of the Fed’s interest rate hikes” and an “encouraging sign that a soft landing is within reach.”

Read more: Warren, Florida’s Scott Want New Watchdog Post at Fed After SVB

“I know many share my concern that raising rates too high and too fast could endanger the record job growth we’ve enjoyed under the leadership of President Biden and congressional Democrats,” he said at the time.

Fed Chair Jerome Powell said in a news conference Wednesday that the Open Markets Committee had considered a pause but unanimously agreed on the need for another hike because of persistent escalated inflation.

“We are committed to restoring price stability, and all of the evidence says that the public has confidence that we will do so,” he said.

Boyle also said in his statement that the Fed “must not forget its dual mandate” to aim for full employment, in addition to keeping inflation low.

Republicans were largely silent on the Fed’s latest move, instead assailing Democrats for policies they said had forced the central bank’s hand.

“Families are continuing to feel the consequences of the Democrats’ inflation crisis,” House Ways and Means Chairman Jason Smith said in an e-mailed statement that began, “Recession warning signs are flashing.”

“Higher interest rates means more Americans unable to buy a home, small businesses that can’t get a line of credit, and families buried in credit card debt they’ve taken on just to get through these last two years,” Smith added, without criticizing the Fed directly.

–With assistance from Justin Sink.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

The Canadian Press. All rights reserved.

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September merchandise trade deficit narrows to $1.3 billion: Statistics Canada

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OTTAWA – Statistics Canada says the country’s merchandise trade deficit narrowed to $1.3 billion in September as imports fell more than exports.

The result compared with a revised deficit of $1.5 billion for August. The initial estimate for August released last month had shown a deficit of $1.1 billion.

Statistics Canada says the results for September came as total exports edged down 0.1 per cent to $63.9 billion.

Exports of metal and non-metallic mineral products fell 5.4 per cent as exports of unwrought gold, silver, and platinum group metals, and their alloys, decreased 15.4 per cent. Exports of energy products dropped 2.6 per cent as lower prices weighed on crude oil exports.

Meanwhile, imports for September fell 0.4 per cent to $65.1 billion as imports of metal and non-metallic mineral products dropped 12.7 per cent.

In volume terms, total exports rose 1.4 per cent in September while total imports were essentially unchanged in September.

This report by The Canadian Press was first published Nov. 5, 2024.

The Canadian Press. All rights reserved.

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Economy

How will the U.S. election impact the Canadian economy? – BNN Bloomberg

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How will the U.S. election impact the Canadian economy?  BNN Bloomberg



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