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Fed officials expressed concerns in over slowing economy – Richmond News

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WASHINGTON — Federal Reserve officials were convinced last month that the U.S. economy and job growth had slowed as coronavirus cases surged across the country, noting that the outlook is heavily dependent on the course of the virus.

The minutes of the Fed’s January discussions show officials believed that the ongoing public health crisis is still posing “considerable risks” to the economy.

The minutes, released Wednesday, reflect widespread Fed support for the central bank’s policy of emphasizing ultra-low interest rates to boost the economy and help millions of Americans regain lost jobs.

“Members agreed that the Federal Reserve was committed to using its full range of tools to support the U.S. economy in this challenging time,” according to the minutes, which covered the Fed’s discussions at its Jan. 26-27 meeting.

The minutes note some improvement in the economy’s medium-term outlook as distribution of vaccines ramped up and Congress passed a $900 billion relief measure that provided more direct payments to individuals and expanded unemployment benefits.

At its January meeting, the Fed kept its benchmark interest rate at a record low of zero to 0.25% and pledged to keep pursuing its low-interest rate policies until an economic recovery is well underway.

The Fed does not meet again until March 16-17. Fed Chairman Jerome Powell, however, will appear before Congress next week to deliver the central bank’s semi-annual monetary report to the Congress, an appearance financial markets will be following closely for any clues of the Fed’s future moves on interest rates.

The Fed has signalled that it does not plan to begin raising interest rates until after 2023. In addition to low rates, the Fed is buying $80 billion in Treasury securities and $40 billion in mortgage-backed securities each month and analysts expect those purchases to continue for some time to come.

Analysts said the minutes indicate no change from the Fed’s emphasis on keeping rates low until the economy has recovered.

Paul Ashworth, chief economist at Capital Economics, said he believes the Fed will not start to reduce its monthly bond purchases until next year and that the first Fed rate hike will not come until 2024.

Charlie Ripley, senior investment strategist for Allianz Investment Management, said that the main takeaway from the minutes is that “accommodative monetary policy will remain in place for the foreseeable future.”

The minutes show that Fed staff updated Fed officials on their assessment of the stability of the U.S. financial system. The staff noted that some financial-market assets had elevated valuations.

“The staff assessed vulnerabilities associated with household and business borrowing as notable, reflecting increased leverage and decreased incomes and revenues in 2020,” the minutes said.

But the staff presentation said that banks have continued to maintain significant levels of high-quality assets and stable sources of funding should loan losses begin to mount.

In remarks last week to the Economic Club of New York, Powell emphasized the Fed’s commitment to reduce unemployment to multi-decade lows.

Powell said while the early recovery last year, helped by nearly $4 trillion in government support, had been surprising, the country was “still very far from a strong labour market whose benefits are broadly shared.”

The government on Wednesday reported the biggest monthly gain in wholesale prices in more than a decade. That news followed a report last week that consumer prices rose in January at their fastest pace in four months.

Powell has cautioned that inflation, which has been a no-show for the past decade, could accelerate for a time in coming months as the country opens up. But he and many private economists believe this will be only a temporary rise and not a sign that inflation is getting out of control.

Martin Crutsinger, The Associated Press

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Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

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OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.

Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.

Business, building and support services saw the largest gain in employment.

Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.

Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.

Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.

Friday’s report also shed some light on the financial health of households.

According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.

That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.

People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.

That compares with just under a quarter of those living in an owned home by a household member.

Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.

That compares with about three in 10 more established immigrants and one in four of people born in Canada.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

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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.

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