Economy

Global central banks were on the same page. Ukraine may reshape that

Published

3 years ago

February 24, 2022

The well-scripted turn by global central banks towards tighter, post-pandemic monetary policy has been thrown into doubt by Russia’s invasion of Ukraine, a geopolitical upheaval likely to be felt differently across the world’s major economic centers.

Risks policymakers face globally include a near immediate spike in the price of oil to above $100 dollars a barrel, and longer-term imponderables of what a European land war could do to confidence, investment, trade and the financial system.

Central banks had been positioned for a head-on fight against inflation while expecting continued strong economic growth.

But now, they may now see growth ebb even as prices continue to surge, a conundrum not easily resolved with standard monetary policy strategies.

“For the major advanced economy central banks the intensification of the war now leaves them in a distinctly worse position,” Oxford Economics analysts wrote.

“The high starting point for inflation…will make it hard for central banks to ignore the near-term upward forces on inflation. But at the same time, they will be aware that the latest developments increase the risks of very low inflation in late 2023 or 2024 due to a weaker growth outlook.”

High inflation in the United States and elsewhere makes it unlikely the Federal Reserve, the European Central Bank, and the Bank of England will fully pause what has been a joint turn towards tighter monetary policy.

Indeed less than 24 hours after Russia’s invasion began, Fed Governor Christopher Waller laid out the case for raising U.S. interest rates by a full percentage point by mid-summer.

“Of course, it is possible that the state of the world will be different in the wake of the Ukraine attack, and that may mean that a more modest tightening is appropriate, but that remains to be seen,” he said.

The Bank of Japan is set to keep monetary policy ultra-loose for the foreseeable future. While an expected rise in fuel would push up inflation closer to its 2% target, concern over the damage to consumption will likely exceed the need to combat inflation with tighter policy, analysts say.

“Rising fuel costs would hurt the economy so tightening policy would be difficult. But the hurdle for easing policy is even higher,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute. “That means the BOJ will maintain the status quo for some time.”

INFLATION AGGRAVATOR

Still, analysts said the new level of uncertainty brought on by Russia’s actions could put policymakers in a more cautious mode, likely to settle at the margins for a bit less policy tightening than a bit more.

The Fed would now likely limit itself to a quarter percentage point rate increase at its March meeting, ruling out the half point hike some policymakers have favored, wrote analysts with Evercore ISI.

The Bank of England might also pare its next expected increase, and the ECB delay making any firm promises about its tightening plans.

The path could be more diverse for central banks in Asia.

Singapore’s central bank is likely on track for a policy tightening as it assesses inflationary outcomes in the run-up to its next semi-annual meeting in April, said Selena Ling, an analyst at OCBC Bank.

The war in Ukraine will have mixed implications for commodity exporter Australia, prompting its central bank to keep rates steady next week as it scrutinizes the impact of the crisis.

“While commodity price impacts are likely to be positive for Australia’s terms of trade, higher petrol prices could weigh on consumer spending, as could a negative wealth shock from falling stockmarkets,” aid Felicity Emmet, a senior economist at ANZ.

“We are happy keeping our pick of a September lift-off for rate hikes.”

Other central banks, however, may be forced to focus more on downside risks to growth.

Nomura analysts said a sustained rise in oil and food prices would hit some Asian economies by weakening their current account and fiscal balances and squeezing growth, with India, Thailand and the Philippines likely the main losers.

“Central banks in developed Asia are likely to tighten policies due to the risk of second round effects amidst an already strengthening economy, while central banks in emerging Asia are likely to prioritize still-weak growth,” Nomura analysts wrote in a research note.

(Reporting by Howard Schneider, Leika Kihara and Mark John; Additional reporting by Ann Saphir, Aradhana Aravindan, Anshuman Daga, Wayne Cole and Enrico Dela Cruz; Editing by Dan Burns, Andrea Ricci and Sam Holmes)

Economy

Minimum wage to hire higher-paid temporary foreign workers set to increase

Published

2 days ago

October 21, 2024

Anne Joseph

OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.

Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.

The change is scheduled to come into force on Nov. 8.

As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.

The program has also come under fire for allegations of mistreatment of workers.

A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.

In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.

The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.

According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.

The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.

Temporary foreign workers in the agriculture sector are not affected by past rule changes.

This report by The Canadian Press was first published Oct. 21, 2024.

— With files from Nojoud Al Mallees

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Economy

PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

Published

6 days ago

October 17, 2024

Anne Joseph

OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

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Economy

Statistics Canada says levels of food insecurity rose in 2022

Published

1 week ago

October 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

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