Federal Reserve officials intensified their battle against the hottest inflation in a generation by shifting to end their asset-buying program earlier and signaling they favor raising interest rates in 2022 at a faster pace than economists were expecting.
Heralding one of the most hawkish policy pivots in years, the central bank said Wednesday it will double the pace at which it’s scaling back purchases of Treasuries and mortgage-backed securities to US$30 billion a month, putting it on track to conclude the program in early 2022, rather than mid-year as initially planned.
The faster pullback puts Fed Chair Jerome Powell in position to raise rates earlier than previously anticipated to counter price pressures if necessary, even as the pandemic poses an ongoing challenge to the economic recovery. The Fed flagged concerns over the new omicron strain, saying that “risks to the economic outlook remain, including from new variants of the virus.”
Powell told a post-meeting press conference that the faster taper put the program on track to end in mid-March and that officials “expect a gradual rate of policy firming.” He said officials don’t expect to raise rates before ending scaling back bond buying, but could hike before reaching full employment.
Projections published alongside the statement showed officials expect three quarter-point increases in the benchmark federal funds rate will be appropriate next year, according to the median estimate, after holding borrowing costs near zero since March 2020.
That marks a major shift from the last time forecasts were updated in September, when officials were evenly split on the need for any rate increases at all in 2022. The new projections also showed policy makers see another three increases as appropriate in 2023 and two more in 2024, bringing the funds rate to 2.1 per cent by the end of that year.
The abrupt change in the taper pace reflects “inflation developments and the further improvement in the labor market,” the policy-setting Federal Open Market Committee said in a statement following a two-day meeting. The Fed reiterated that it “is prepared to adjust the pace of purchases if warranted by changes in the economic outlook.”
“Economic activity is on track to expand at a robust pace this year,” Powell said, adding that “the economy has been making rapid progress toward maximum employment.”
The yield on 10-year Treasuries rose while the yield curve flattened sharply. Meanwhile the S&P 500 index advanced and the dollar surged. Traders lifted the amount of Fed interest rate increases they see for 2022 up to about 73 basis points.
“You are seeing a bit more panic instead of patience within the ranks of the FOMC,” said Diane Swonk, chief economist at Grant Thornton LLP. “This is the first time we’ve seen the Federal Reserve chasing inflation in decades.”
EMPLOYMENT GOAL
On interest rates, “With inflation having exceeded 2 per cent for some time, the committee expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the committee’s assessments of maximum employment.”
The FOMC vote was unanimous.
“Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation,” the FOMC said.
While the accelerated taper was in line with expectations from the majority of economists surveyed by Bloomberg News, the interest-rate path was steeper than what analysts had generally seen.
Investors had been expecting a rate hike by mid-year, according to trading in futures contracts, with some chance of a move as soon as March.
Powell, whom President Joe Biden recently renominated to a second four-year term at the helm of the central bank, has faced increasing pressure from both Democrats and Republicans to take more aggressive action on inflation.
INFLATION SURPRISE
Fed officials were caught off guard by the price pressures, which they argued would fade as the world adjusted to COVID-19. Instead, the pandemic has continued and inflation has soared, fanned by supply-chain bottlenecks and strong demand amid massive fiscal and monetary policy support.
In the FOMC statement, officials removed a prior reference to inflation reflecting factors that were “expected to be transitory.” Powell told lawmakers last month that it was time to “retire” the Fed’s description of high inflation as “transitory,” a stance it held for most of 2021.
Consumer prices rose 6.8 per cent in the year through November, marking the fastest pace of increase since 1982. In recent months, surging food and energy prices and accelerating rental inflation have contributed more to overall inflation than earlier in the year, when outsize price increases were concentrated largely in the used-car market and a reopening leisure and hospitality sector.
Unemployment dropped to 4.2 per cent in November from 4.6 per cent in October, a quicker pace of recovery than forecasters had anticipated. Still, the gap between White and Black unemployment rates remains wide — at 3.7 per cent and 6.7 per cent, respectively — and Fed officials have said they will take those disparities into account under a new “broad-based and inclusive” approach to judging maximum employment, which they announced last year.
The FOMC’s median projection for 2022 inflation was revised to 2.6 per cent, from 2.2 per cent in September. And it now projects the unemployment rate at the end of next year will be 3.5 per cent, versus 3.8 per cent in September.
Biden still has three more open seats to fill on the central bank’s Board of Governors in Washington and is expected to announce his picks in the coming days. His selections, as well as whoever the Dallas and Boston Fed banks choose to be their next presidents, could play a significant role in the direction the FOMC takes next year.
Those changes also mean the dot plot rate projections released Wednesday reflect the views of several officials who won’t be part of the decision-making process as the Fed navigates the next phase of the economic recovery from the pandemic.
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.
