The Bank of England has held interest rates at 0.75% amid early signs of a pick-up in the UK and global economies.
In Mark Carney’s final interest rate meeting as governor, the Bank’s Monetary Policy Committee (MPC) voted 7-2 to keep rates unchanged.
Recent weak economic data had led to speculation rates could be cut, but Mr Carney said “the most recent signs are that global growth has stabilised”.
But the MPC said it was poised to cut interest rates if necessary.
Fewer companies in the UK are worried about Brexit, Mr Carney told a news conference following the rate decision. He added that survey data suggested UK growth will improve.
But he said: “To be clear these are still early days and it’s less of a case of so far so good than so far good enough,” he said, again referring to the UK economy.
“Although the global economy looks to be recovering, caution is warranted,” he said. “Evidence of a pick-up in growth is not yet widespread.”
He said the coronavirus outbreak was a “reminder of the need to be vigilant” when it comes to bumps in economic growth around the world.
Ready to cut
The nine MPC members have been split on rates since November.
Lower interest rates are good news for borrowers and bad news for savers because High Street banks use the Bank of England base rate as a reference point for many mortgages and savings accounts.
In a closely-watched decision, policymakers said they would monitor whether a recent improvement in business sentiment would lead to stronger economic growth.
The MPC said it stood ready to cut rates if there were signs that growth would remain subdued.
“Policy might need to reinforce the expected recovery in UK GDP growth, should the more positive signals from recent indicators of global and domestic activity not be sustained,” the MPC said.
Two members, Jonathan Haskel and Michael Saunders, argued that past business surveys of economic growth had not been reliable.
They continued to call for an immediate interest rate cut to 0.5%.
Weak UK growth
The Bank’s latest economic estimates suggest the economy did not grow at all in the final three months of last year.
Weaker growth at the turn of the year is also expected to drag overall economic growth down to just 0.75% in 2020. This is down from a projection of 1.25% last November.
The UK economy is expected to expand by 0.2% in the first three months of this year.
The Bank said a trade deal between the US and China that lowers some tariffs would provide a boost to the global economy.
An expected rise in spending by the government in the March Budget could provide a further boost to growth, policymakers said.
Ruth Gregory, senior UK economist at Capital Economics, said she also expected stronger growth ahead.
“Admittedly, the MPC left the door open to a rate cut in the coming months, but with the economy turning a corner and a big fiscal stimulus approaching, we suspect the next move in interest rates will be up not down, albeit not until next year.”
Brexit drag
The Bank said Brexit-related uncertainty had “weighed on investment” over the past few years.
Policymakers said companies’ Brexit plans had diverted money towards preparing for the UK’s departure from the EU that would otherwise be invested elsewhere.
This has reduced the UK’s long-term growth prospects by limiting the space in which the economy can grow without the risk of overheating.
This would force the Bank to raise interest rates, which would in turn slow the UK economy.
Policymakers now believe the UK’s potential growth has been reduced to 1.1%. This is down from 2.9% before the financial crisis and 1.6% over most of the past decade.
OTTAWA – Statistics Canada says retail sales rose 0.4 per cent to $66.6 billion in August, helped by higher new car sales.
The agency says sales were up in four of nine subsectors as sales at motor vehicle and parts dealers rose 3.5 per cent, boosted by a 4.3 per cent increase at new car dealers and a 2.1 per cent gain at used car dealers.
Core retail sales — which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers — fell 0.4 per cent in August.
Sales at food and beverage retailers dropped 1.5 per cent, while furniture, home furnishings, electronics and appliances retailers fell 1.4 per cent.
In volume terms, retail sales increased 0.7 per cent in August.
Looking ahead, Statistics Canada says its advance estimate of retail sales for September points to a gain of 0.4 per cent for the month, though it cautioned the figure would be revised.
This report by The Canadian Press was first published Oct. 25, 2024.
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.
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.
