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Sri Lankan protesters demand president quit over economic crisis – Al Jazeera English

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Protests in capital demand President Gotabaya Rajapaksa resign as the country suffers its worst economic crisis in decades.

Anti-government protests have roiled Sri Lanka’s capital amid demands that President Gotabaya Rajapaksa resign, as the country suffers its worst economic crisis in decades.

Tens of thousands of people gathered outside the president’s office in Colombo on Tuesday, led by supporters of the opposition party, the United People’s Force.

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Opposition leader Sajith Premadasa addressed the demonstration, declaring it marked the beginning of a campaign to remove the government.

“You have been suffering now for two years. Can you suffer further?” he told the large crowd carrying signs and anti-government banners.

Premadasa described the sitting government as “evil” and blamed it for many of the country’s economic woes.

Sri Lankans hold a picture of Minister of Finance
People hold a picture of Finance Minister Basil Rajapaksa during the protest in Colombo [Dinuka Liyanawatte/Reuters]

Demonstrators accused the government of mismanaging the economy and creating a foreign exchange crisis that has led to shortages of essentials like fuel, cooking gas, milk powder and medicine.

Sri Lanka is struggling to pay for imports as its foreign reserves are at an all-time low.

Fuel shortages have curbed transportation within the country, including of essential supplies, and have led to hours-long daily power cuts.

In the face of the fiscal crisis, Sri Lanka’s central bank floated the national currency last week, resulting in its devaluation by 36 percent and a further sharp rise in prices.

Authorities have expanded banned imports to include some fruits and milk products, alongside the existing ban on imports of cars, floor tiles and other products, to staunch the outflow of foreign currency.

Sri Lanka’s fiscal crisis is partly driven by outstanding foreign debts of some $7bn.

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Russia is pushing its central bank to give 'upbeat' economic updates – Business Insider

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Russia is pushing its central bank to give ‘upbeat’ economic updates  Business Insider

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Biden highlights economy, spars with Republicans in State of the Union speech – Global News

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Biden highlights economy, spars with Republicans in State of the Union speech  Global News

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Given high inflation, slowdown in Canada’s economy is ‘a good thing,’ Tiff Macklem says

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Bank of Canada governor Tiff Macklem says that although a slowing economy may not seem like a good thing, it is when the economy is overheated.

Speaking in Quebec City on Tuesday, Macklem said that higher interest rates are working to cool the economy as elevated borrowing costs are constraining spending on big-ticket items such as vehicles, furniture and appliances.

As demand for goods and services falls, Macklem says the economy will continue to slow.

“That doesn’t sound like a good thing, but when the economy is overheated, it is,” he said.

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In addition to global events, the overheated domestic economy pushed up prices rapidly, he said.

To slow the economy domestically, the Bank of Canada has embarked on one of the fastest monetary policy tightening cycles in its history. It has hiked its key interest rate eight consecutive times since March, bringing it from near-zero to 4.5 per cent.

However, last month, the Bank of Canada said it will take a “conditional” pause to assess the effects of higher interest rates on the economy.

“Typically, we don’t see the full effects of changes in our overnight rate for 18 to 24 months,” Macklem said on Tuesday.

“In other words, we shouldn’t keep raising rates until inflation is back to two per cent.”

However, the governor said the Bank of Canada will be ready to raise rates further if inflation proves to be more stubborn than expected.

Bank of Canada hikes interest rates again to 4.5%

The Bank of Canada is raising interest rates again, bumping it to 4.5 per cent. This marks the eighth increase in less than a year, leaving some homeowners scrambling to keep their mortgages.

As gas prices have fallen and supply chains have improved, inflation in Canada has slowed since peaking at 8.1 per cent in the summer. Macklem called this a “welcome development,” but stressed inflation is still too high.

“If new data are broadly in line with our forecast and inflation comes down as predicted, then we won’t need to raise rates further,” Macklem said.

For inflation to get back to two per cent, Macklem said wage growth will have to slow, along with other prices.

Wage gains lagging inflation

Wages have been growing rapidly for months but continue to lag the rate of inflation. In December, wages were up 5.1 per cent.

Though annual inflation is still at decades-high levels, economists have been encouraged by a more noticeable slowdown in price growth over recent months.

The Bank of Canada forecasts the annual inflation rate will fall to three per cent by mid-year and to two per cent in 2024.

Royce Mendes, an economist with Desjardins, said that Macklem is crossing his fingers that the rate hikes he has implemented so far will be enough to get it done.

“The head of the Bank of Canada seems quite comfortable sitting on the sidelines even as his U.S. counterpart will be discussing the need for further monetary tightening south of the border,” Mendes said.

 

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