WASHINGTON (AP) — Not long ago, anticipation was high that Federal Reserve Chair Jerome Powell might begin to sketch out a plan this week for the Fed to start pulling back on its support for an economy that has been steadily strengthening.
That was before COVID-19 cases began accelerating across the country. Now, the decision of how and when the Fed should begin dialing back its help for the economy has become a more complicated one.
Yet in outlining his view of the economy and the threats it faces in a high-profile speech Friday, Powell may provide important clues to the timing of changes in the Fed’s ultra-low-interest rate policies.
The big question has been when the Fed will begin to slow its purchases of Treasury and mortgage bonds. The Fed has been buying $120 billion in bonds each month since the pandemic erupted in March 2020 to try to keep longer-term rates low and encourage borrowing and spending. It has also pegged its short-term benchmark interest rate at nearly zero since then.
Powell will be speaking Friday at an annual conference of academics and central bankers. The conference, sponsored by the Federal Reserve Bank of Kansas City and normally held in Jackson Hole, Wyoming, will instead be a virtual-only event for a second straight year. A surge of COVID-19 cases near the Wyoming resort delivered a direct impact on the Fed itself by forcing a last-minute cancellation of its in-person plans.
The hasty shift to an online event reflects the rapid rebound of the pandemic, led by the delta variant, particularly in the South and Northwest. It follows a sharp decline in confirmed cases earlier in the summer that had raised hopes that the coronavirus and its economic impact might be fading.
Yet some economists have been slashing their forecasts for economic growth in the current July-September quarter. Restaurant traffic has declined slightly. Last week, Powell said it wasn’t yet clear what the delta strain’s impact on the economy would be. But he emphasized that the pandemic was far from over and was still “casting a shadow on economic activity.”
With the economic picture hazier now, economists will be listening carefully for clues Powell may provide about the Fed’s intentions.
“I’ll be watching how he characterizes current conditions and the outlook he has for the economy,” said Ellen Gaske, an economist at PGIM Fixed Income. “That will give us a sense of how soon the tapering will occur.”
The uncertainties raised by the delta variant make it likelier that the Fed will announce a tapering in November or later, economists said, rather than in September. That would allow Fed officials to consider two additional months of data on inflation and jobs to gauge the delta variant’s impact.
The resurgence of the virus is hardly the only complicating factor facing the Fed. Inflation has surged to a three-decade high as a sharp rebound in consumer spending and shortages in many commodities and parts, such as semiconductors, have sent prices rising for airline tickets, hotel rooms, new and used cars and restaurant meals. The Fed’s preferred inflation gauge jumped 3.5% in June compared with a year earlier, the biggest such rise since 1991.
Higher inflation has, in turn, intensified pressure on Powell and the Fed to rein in their stimulus policies. Powell, though, has consistently expressed confidence that higher inflation will prove temporary, even if it persists for several more months. Many economists and Wall Street investors agree. Some, in fact, are more concerned about the opposite problem: That inflation will decline too far from its current level.
At the same time, growth could slow. Government stimulus is set to fade next year. No more stimulus checks are in the pipeline, and a $300-a-week federal unemployment supplement is set to expire in two weeks. Gaske noted that the price jumps have caused consumers to reduce their spending on things like cars and furniture, which over time reduces inflation pressures.
That’s in contrast to the late 1970s, the last time the United States faced rapid inflation, when rising prices encouraged a “buy it while you can” mentality, Gaske said. Ongoing spending at that time drove costs even higher.
As a result, any pullback in the Fed’s low-rate policies could help pull inflation below its 2% annual target in a year or two.
It’s also getting harder for the Fed to define its other policy goal of “maximum employment.” Initially Powell and other officials, including Vice Chair Richard Clarida, defined it as a “broad and inclusive” goal that included sharply reducing unemployment for Black Americans and Latinos and restoring the job market to its pre-pandemic health.
Yet the number of older Americans who are retiring has accelerated since the pandemic struck, and it’s far from clear that low interest rates would induce many of them to return to work. A smaller workforce could make it harder to restore the job market to pre-pandemic levels.
Many economists were surprised by remarks from Clarida this month suggesting that a return to an unemployment rate of 3.8% would meet the Fed’s goal of maximum employment and justify a rate hike by the end of 2022, earlier than Fed officials had projected in June.
Even if the jobless rate falls that low — it is now 5.4% — millions of Americans could remain on the sidelines, no longer looking for work and therefore not counted as unemployed. Black and Latino Americans would likely have much higher unemployment rates. Fed officials had previously made clear that they would take those concerns into account, but Clarida did not mention them.
“They’ve certainly not reinforced their commitment to broad and inclusive gains,” Adam Posen, president of the Peterson Institute for International Economics, said on a conference call with reporters. “They could have stuck with it much more than they did.”
Fed officials had expected much more clarity around the economy and job market by early fall. As the pandemic faded, more Americans would return to work, instead of shying away out of fear of viral infection. Now the delta variant could prolong that fear and postpone the point at which the Fed can get a clear read on the job market.
“It’s really hard for Powell to signal much here,” said William English, a former senior official at the Fed and now a finance professor at the Yale School of Management. “They’re in a world with a lot of uncertainty.”
TORONTO – Canada Goose Holdings Inc. says it has signed a deal that will result in the creation of its first eyewear collection.
The deal announced on Thursday by the Toronto-based luxury apparel company comes in the form of an exclusive, long-term global licensing agreement with Marchon Eyewear Inc.
The terms and value of the agreement were not disclosed, but Marchon produces eyewear for brands including Lacoste, Nike, Calvin Klein, Ferragamo, Longchamp and Zeiss.
Marchon plans to roll out both sunglasses and optical wear under the Canada Goose name next spring, starting in North America.
Canada Goose says the eyewear will be sold through optical retailers, department stores, Canada Goose shops and its website.
Canada Goose CEO Dani Reiss told The Canadian Press in August that he envisioned his company eventually expanding into eyewear and luggage.
This report by The Canadian Press was first published Sept. 19, 2024.
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
TORONTO – TD Bank Group, which is mired in a money laundering scandal in the U.S., says chief executive Bharat Masrani will retire next year.
Masrani, who will retire officially on April 10, 2025, says the bank’s, “anti-money laundering challenges,” took place on his watch and he takes full responsibility.
The bank named Raymond Chun, TD’s group head, Canadian personal banking, as his successor.
As part of a transition plan, Chun will become chief operating officer on Nov. 1 before taking over the top job when Masrani steps down at the bank’s annual meeting next year.
TD also announced that Riaz Ahmed, group head, wholesale banking and president and CEO of TD Securities, will retire at the end of January 2025.
TD has taken billions in charges related to ongoing U.S. investigations into the failure of its anti-money laundering program.
This report by The Canadian Press was first published Sept. 19, 2024.
