From Washington to Frankfurt to London and beyond, central bankers are approaching their final decisions of the year against a backdrop of unease at how the global inflation cycle is turning.
Policymakers from fully half of the Group of 10 jurisdictions of most-traded currencies are scheduled to meet in the coming days, and interest rates for 60 per cent of the world economy will be set in a whirlwind 60-hour window.
With the exception of Norway, which may conceivably raise borrowing costs, most monetary officials are confronting financial-market pressure to explain why they seem unhurried about pivoting to monetary easing.
Synchronized weakening in inflation data and some evidence of softening economies have prompted investors to ramp up bets on rate cuts in the first half of 2024. That’s a view that could clash with the mantra the Fed and its peers expounded little more than three months ago, of “higher for longer.”
In Latin America, which led the push upwards with rate hikes, most central banks are already on the way down, and Brazil and Peru may both cut in the coming week.
Their peers in the U.S. and Europe aren’t so sure. After starting the year with renewed vigour to aggressively ramp up borrowing costs, they’re ending 2023 with more hesitation — setting the scene for what could become a prolonged standoff with investors.
The Fed is widely expected to keep its benchmark rate at the highest level in two decades as policymakers assess the lagged impact of their aggressive series of hikes since early 2022.
As central bankers gather Tuesday to begin two days of deliberations, they’ll have fresh inflation data in hand. The core consumer price index is seen reinforcing expectations that chair Jerome Powell, at his press conference the following day, will acknowledge both the progress made on inflation as well as the risks of stubborn price pressures.
The core CPI for November, which excludes food and fuel for a better snapshot of underlying inflation, is projected to climb 0.3 per cent from a month earlier, when it rose 0.2 per cent. Compared with a year ago, forecasters see a four per cent advance that indicates that inflation is abating only gradually.
Nonetheless, there are indications demand across the economy is cooling as the year draws to a close. November retail sales data on Thursday are expected to reveal consumers are becoming more guarded.
At the end of the week, industrial production figures are seen showing a partial rebound in factory output as striking auto workers returned to assembly lines.
President Christine Lagarde will probably try to temper market expectations that are pricing in a quarter-point European Central Bank rate cut in April.
While the euro zone could well be in a recession, and policymakers acknowledge that the labour market is showing signs of turning, they aren’t fully convinced that the danger to consumer prices has passed, and want to see more wage data.
Executive board member Isabel Schnabel has called the inflation slowdown so far “remarkable,” and said that further rate hikes are now unlikely. But she hasn’t pivoted much further. One colleague, Peter Kazimir of Slovakia, termed expectations for a rate cut in the first quarter of 2024 “science fiction.”
The Bank of England is expected to keep rates on hold for a third straight meeting and deliver a warning that the fight against inflation is far from over.
With the U.K. economy facing stagnation at best next year, investors are betting that the Monetary Policy Committee will start cutting borrowing costs – now at a 15-year high of 5.25 per cent — in June.
However, officials are likely to repeat their guidance that policy needs to remain restrictive for an “extended” period to stop inflation from sticking above their two per cent target amid a still-tight labor market and price pressures in the services sector. The BOE announces its decision at noon on Thursday.
Swiss inflation is even weaker than in the neighbouring euro zone — in fact, it has now declined to well below the two per cent ceiling targeted by policymakers.
Speculation that they won’t cut rates as quickly as the ECB has pushed the franc to its highest level since the Swiss National Bank abandoned its cap on the currency nine years ago.
Norges Bank faces a tough choice on whether to go ahead with a final quarter-point rate hike. Recent data could encourage officials to brush off potentially inflationary krone weakness and stay on hold as the economy cools.
Stagnation is anticipated for the current quarter before a contraction at the start of 2024, as businesses encounter more spare capacity and fewer hiring problems, a key sentiment survey by the central bank showed this week.
Meanwhile, building activity is falling sharply and retail activity is slowing, even as Norway’s fossil-fuel sector cushions some of the fallout from stubbornly high inflation and rising credit costs. The Norges Bank decision comes Thursday.
After raising its key rate by 200 basis points in October, the Bank of Russia will likely need to hike by another percentage point to 16 per cent on Friday as policymakers strive to bring inflation back to their four per cent target, according to Bloomberg Economics Russia economist Alexander Isakov.
True to repeated signalling, Brazil’s central bank, led by Roberto Campos Neto, can be expected to deliver a fourth-straight half-point rate cut on Wednesday, to 11.75 per cent.
A cooling economy and inflation that’s slowed back to within the central bank’s target range is widely expected to keep Banco Central do Brasil on that pace through the first quarter of 2024.
At that point, the board may slow the pace of rate reductions — depending on the global backdrop and state of local long-term inflation expectations, which remain above target across the entire forecast horizon.
In Mexico, where Banxico typically doesn’t go in for dovish surprises, expect a unanimous decision on Thursday to keep the key rate at a record 11.25 per cent for a sixth straight meeting.
Looking ahead, slowing core inflation and a cooling services component now have governor Victoria Rodriguez saying that the rate-cut discussion could begin in early 2024. The consensus among analysts is for an easing cycle to begin in the first quarter.
Also on Thursday, Banco Central de Reserva del Perú’s December meeting finds the economy in recession and riding consecutive months of deflation, possibly making a case for a 50 basis-point reduction after three straight quarter-point cuts.
Still, upside risks to inflation from El Niño-related disruptions and ongoing political turmoil will likely see veteran bank chief Julio Velarde stay the course and lower the key rate to 6.75 per cent from seven per cent.
— with assistance from Robert Jameson, Vince Golle, Ott Ummelas, Tony Halpin, Lizzy Burden, Andrew Atkinson, Anna Edwards and Bastian Benrath.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
The Canadian Press. All rights reserved.
VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.
Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.
Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”
The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.
Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.
“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”
Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.
Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.
Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.
B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.
The election is expected to be called on Sept. 21, with the vote set for Oct. 19.
“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”
Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.
Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.
The premier said that now is not the time to reduce supports and services for people.
Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.
Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.
This report by The Canadian Press was first published Sept. 10, 2024.
Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.
The Canadian Press. All rights reserved.
NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.
But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.
He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.
Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.
Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.
Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.
This report by The Canadian Press was first published Sept. 10, 2024.
The Canadian Press. All rights reserved.
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