Business

Fed poised to hike rates as markets anticipate inflation endgame

Published

1 year ago

July 26, 2023

WASHINGTON, July 26 (Reuters) – The Federal Reserve is expected to raise interest rates by a quarter of a percentage point on Wednesday, marking the 11th hike in the U.S. central bank’s past 12 policy meetings and possibly a last move in its aggressive battle to tame inflation.

The increase, anticipated by investors with nearly a 100% probability, would raise the benchmark overnight interest rate to the 5.25%-5.50% range. That would bring it to roughly the highest level since the approach to the 2007-2009 financial crisis and recession.

There’s little sense a similar collapse is on the horizon. Far from it, the economy is proving more resilient to rising interest rates than expected, with ongoing growth and an unemployment rate that is currently pinned at a low 3.6%.

In assessing where policy may move next, in fact, the Fed will be balancing whether the economy remains too strong to return a still-elevated rate of inflation to the central bank’s 2% target against evidence that a process of “disinflation” may be underway that is likely to continue even without any further rate increases.

After a rapid series of rate hikes over the last year, with the central bank moving in unusually large three-quarters-of-a-percentage-point steps at one point, policymakers say they are now making meeting-by-meeting judgments based on incoming data, an approach meant to keep their options open and one likely to be emphasized by Fed Chair Jerome Powell in a press conference shortly after the 2 p.m. EDT (1800 GMT) release of the policy statement.

A key question, said Steve Englander, head of G10 FX research and North America macro strategy at Standard Chartered, is whether the Fed “puts more emphasis on weaker-than-expected inflation or stronger-than-expected activity in determining policy” moving forward.

NEARING THE END

The Fed will not update quarterly economic and interest rate projections at this week’s meeting, though policymakers will have a chance to discuss quarterly bank survey data that has taken on heightened importance since a string of regional bank collapses earlier this year.

Policymakers’ projections in June showed the Fed likely nearing the end of its hiking cycle, with a majority of them seeing the need for only one further quarter-percentage-point increase beyond the expected hike on Wednesday.

Data since June, if anything, has lowered expectations that further rises in borrowing costs will be needed, with headline inflation data coming in weaker than expected, and information about producer prices and other aspects of the economy suggesting further moderation is developing. Indeed, as policymakers began their two-day meeting on Tuesday, the Conference Board reported U.S. consumers’ 12-month inflation expectations sank to the lowest level since November 2020.

New data on the Fed’s preferred measure of inflation, the personal consumption expenditures price index, will be released on Friday. A Reuters poll showed economists expect the measure, stripped of volatile food and energy prices, to have increased at a 4.2% annual rate in June, which would be the lowest since September 2021.

That is a significant decline in a data point that has been stuck at around 4.6% since December. But it is still more than double the Fed’s target, and officials including Powell have said they will not shift gears on policy until progress on inflation is sustained over several months and they are convinced the pace of price increases will return to 2%.

The Fed will have a larger-than-usual amount of data to assess before its next meeting on Sept. 19-20, some eight weeks away. The typical gap between meetings is six weeks. The longer span allows a full two months of information on jobs and inflation to accumulate, and in this case will also provide the first two of three reports on economic growth in the second quarter.

Reporting by Howard Schneider;
Editing by Dan Burns and Paul Simao

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Business

Roots sees room for expansion in activewear, reports $5.2M Q2 loss and sales drop

Published

1 day ago

September 13, 2024

Anne Joseph

TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.

The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.

“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.

The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.

But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.

Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.

“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.

“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”

Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.

The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.

In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.

Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.

The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.

The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.

Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.

Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.

It will also re-evaluate its design ranks.

Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.

Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.

This report by The Canadian Press was first published Sept. 13, 2024.

Companies in this story: (TSX:ROOT)

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Business

Talks on today over HandyDART strike affecting vulnerable people in Metro Vancouver

Published

2 days ago

September 12, 2024

Anne Joseph

VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.

No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.

About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.

Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.

Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.

A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”

This report by The Canadian Press was first published Sept. 12, 2024.

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Business

Transat AT reports $39.9M Q3 loss compared with $57.3M profit a year earlier

Published

2 days ago

September 12, 2024

Anne Joseph

MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.

The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.

The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.

Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.

On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.

Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.

This report by The Canadian Press was first published Sept. 12, 2024.

Companies in this story: (TSX:TRZ)

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