Economy

UK interest rate hike is 1st in a top economy amid pandemic – The Daily Courier

Published

3 years ago

December 16, 2021

LONDON (AP) — The United Kingdom’s central bank on Thursday became the first in a major advanced economy to raise interest rates since the coronavirus pandemic began, as banks controlling monetary policy around the globe shift their focus from stimulating the economy to combating soaring consumer prices that arrived during the recovery.

The moves come despite the threat that the new omicron variant of COVID-19 poses. The European Central Bank took a much more cautious approach than the Bank of England, but it also decided the economic recovery was strong enough for it to start carefully dialing back some of its stimulus efforts over the next year.

The U.K. bank was joined by Norway, which hiked its benchmark interest rate in the face of troublesome levels of inflation. Central banks typically raise rates to fight inflation and lower them when economies are weak, as they were during the pandemic. They have also used bond purchases to drive down market rates for borrowers during the pandemic, aiming to help businesses limit staff cutbacks or avoid bankruptcy.

The U.S. Federal Reserve also decided this week to speed up its exit from pandemic crisis support as inflation reached a 40-year high of 6.8% in November, putting it on a path to start raising interest rates as early as the first half of next year. The eurozone’s inflation rate is 4.9%, highest since statistics started in 1997, though the central bank says much of that is temporary.

At first glance, the central bank moves seemed to show a disconnect from government warnings about the spread of omicron and the accompanying new travel restrictions and testing requirements. That is at least partly because central banks know their policies take months to push inflation and economic growth up or down — and may take full effect only after the omicron wave has crested and subsided.

“By the time today’s rate increase will have any noticeable impact on the inflation outlook, the potential near-term hit to economic activity from omicron will almost certainly be history,” said Holger Schmieding, chief economist at Berenberg bank.

European Central Bank President Christine Lagarde also acknowledged what many economists have been saying: Businesses and consumers have been learning to navigate the new world of anti-virus restrictions — meaning successive waves have less overall economic impact, as miserable as they may be for the hardest-hit sectors like hotels and restaurants.

“Overall, society has become better at coping with the pandemic waves and resulting constraints,” she said.

The Bank of England’s increase in its main rate to 0.25% from the record low of 0.1% was a surprise given the news around omicron’s rapid spread across the U.K., which is already hurting many businesses, particularly those in the hospitality sector.

The country’s chief medical officer urged people to limit socializing over the holidays as the U.K. on Wednesday recorded the highest number of confirmed new COVID-19 infections since the pandemic began. British restaurants and pubs demanded government help.

But with consumer price inflation running at 5.1%, more than double the bank’s target of 2%, the vast majority on the bank’s rate-setting Monetary Policy Committee decided action was needed now. For many households struggling with rising prices, it’s likely to be another hit to their incomes, at least in the short-term, with mortgages and loans set to increase, too.

Economists said the decision underlined the extent to which policymakers are worried about inflation, even before knowing the full extent of the hit to growth stemming from omicron.

“Instead of battening down the hatches and waiting for the latest COVID storm to subside, they are taking action now to prevent an even sharper spiraling upwards of prices,” said Susannah Streeter, senior investment and markets analyst at stockbrokers Hargreaves Lansdown.

Britain becomes the first member of the Group of Seven economies — a group of democracies with high living standards and advanced economies — to start raising interest rate benchmarks. The other members are Canada, France, Germany, Italy, Japan and the U.S. France, Germany and Italy are part of the eurozone.

The U.K. rate increase sent the pound soaring in currency markets — one sign that it hadn’t been expected. Soon after the decision, the pound was trading 0.7% higher at $1.3360.

The outlier in Thursday’s action was Turkey, where the central bank again cut a key interest rate despite soaring consumer prices that are making it difficult for people to buy basic goods. The decision sent the country’s currency to record lows against the U.S. dollar.

The bank’s policies are in line with the views of President Recep Tayyip Erdogan, who has been pressing for low borrowing costs to boost growth, despite conventional economic policy that says raising interest rates eases high inflation.

Adblock test (Why?)

Source link

Economy

B.C.’s debt and deficit forecast to rise as the provincial election nears

Published

2 days ago

September 10, 2024

Anne Joseph

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.

Source link

Economy

Mark Carney mum on carbon-tax advice, future in politics at Liberal retreat

Published

2 days ago

September 10, 2024

Anne Joseph

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.

Source link

Economy

Nova Scotia bill would kick-start offshore wind industry without approval from Ottawa

Published

2 days ago

September 10, 2024

Anne Joseph

HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.

Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.

The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.

Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”

Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.

Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.

This report by The Canadian Press was first published Sept. 10, 2024.

Source link