Federal Reserve Chair Jerome Powell speaks during a news conference following the Federal Open Market Committee meeting in Washington, Wednesday, Jan. 29, 2020. (AP Photo/Manuel Balce Ceneta)
Just as the outlook for the global economy had been brightening in recent months, a new threat has suddenly emerged in the form of the viral outbreak in China.
That was the cautionary message that Chairman Jerome Powell delivered Wednesday after the Federal Reserve held interest rates low after its latest policy meeting.
Speaking at a news conference, Powell said the signing of a preliminary U.S.-China trade deal earlier this month, the resolution of Brexit and continuing low interest rates in the United States and abroad had suggested that the world economy would start to expand more quickly after being held back by trade conflicts. That scenario is now complicated by the emergence of the virus.
Still, Powell noted that the extent of the economic damage that the virus may ultimately inflict, in China or around the world, remains unknown.
“There is likely to be some disruption to activity in China and globally,” Powell said. “It’s very uncertain how far it will spread and what the (economic) effects will be in China, for its trading partners, and around the world…. We are very carefully monitoring the situation.”
Even so, Powell said he thinks there are “there are signs and reasons to expect” a global economic rebound. And he said the initial U.S.-China trade agreement and a new trade pact among the U.S., Canada and Mexico that President Donald Trump signed into law Wednesday could potentially boost the U.S. economy.
Powell spoke after the Fed had announced that it has kept its key interest rate unchanged in a low range of 1.5% to 1.75%, far below levels that were typical during previous expansions. The chairman and other Fed officials have indicated that they see that range as low enough to support faster growth and hiring.
Investors, however, are increasingly betting that the Fed will feel compelled to cut rates later this year, likely out of concern that the U.S. will feel the impact of a global slowdown stemming from the coronavirus. The chances of a cut by September’s Fed meeting have risen above 70%, according to the Chicago Mercantile Exchange’s FedWatch tool, up from roughly 40% just a month ago.
Still, Paul Ashworth, chief U.S. economist at Capital Economics, said he saw nothing in the Fed’s statement or at Powell’s news conference to make him change his belief that the central bank will keep its benchmark rate unchanged for the foreseeable future.
“Unless the U.S. experiences its own epidemic, we doubt that the indirect effects from the disruptions in China would be enough to warrant a U.S. rate cut,” Ashworth said.
The coronavirus has in effect shut down much of that nation and seems sure to slow the Chinese economy — the world’s second-largest — which had already been decelerating. The virus has now infected more people in China than were sickened in the country by the SARS outbreak in 2002-2003.
Major companies across the world have responded to the virus by suspending some operations in China. Starbucks said it plans to close half its stores in China, its second-largest market. British Airways has halted all flights to China, and American Airlines suspended Los Angeles flights to and from Shanghai and Beijing.
Hotels, airlines, casinos and cruise operators are among the industries that have suffered the most immediate repercussions. Apple CEO Tim Cook said the company’s suppliers in China have been forced to delay the re-opening of factories that have closed for the Chinese New Year holiday until Feb. 10.
Stock prices slipped after the Fed issued its statement and Powell concluded his news conference. The Dow Jones Industrial Average closed barely higher after having posted stronger gains in earlier trading. Bond yields declined slightly.
The Fed’s statement, which its policymaking committee approved 10-0, was nearly identical to the one it issued in December, though this time it described consumer spending as rising at only a “moderate” rather than at a “strong” pace. That change likely reflects relatively modest spending by Americans over the holiday shopping season.
The statement also signalled that the Fed wants inflation to move higher. The Fed’s preferred measure showed inflation rose just 1.5% in November from a year earlier, below its 2% target.
“We’re not comfortable with inflation running persistently below” the Fed’s objective, Powell said. The Fed seeks inflation at that level as a cushion against deflation, a destabilizing drop in prices and wages.
Last year, the Fed cut its benchmark rate three times after having raised it four times in 2018. Powell and other Fed officials credit those rate cuts with revitalizing the housing market, which had stumbled early last year, and offsetting some of the drag from President Donald Trump’s trade war with China.
On another topic, Powell said the Fed will continue its purchases of six-month Treasury bills to ensure that short-term lending markets operate smoothly. The Fed began buying $60 billion of the bills each month in October to expand cash reserves that are available for overnight lending, after a shortage of reserves caused overnight rates to spike. The lending squeeze also pushed the Fed’s benchmark rate out of its target range.
The Fed plans to continue its purchases until the second quarter, Powell said, while it slowly draws down some temporary lending it has also done to boost short-term lending markets.
Powell said the overall economy, not just Wall Street, has benefited from the Fed’s bond-buying because it’s enabled the Fed’s low-rate policy to reduce mortgage rates and other consumer borrowing costs.
“That really is important for the public,” Powell said.
The Fed’s decision came a day after Trump, in a tweet, again pressed Powell to cut rates, arguing that this would make U.S. interest rates “competitive with other Countries.” Yet the Fed hopes to avoid the ultra-low and negative interest rates that exist in much of Europe and in Japan, which they — and most analysts — see as evidence of weak economies.
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.
