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‘Unsettling news’: What inflation’s uptick means for the Bank of Canada

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An acceleration in the annual rate of inflation to end 2023 won’t be enough to panic the Bank of Canada heading into its first interest rate decision of the year, economists argue, but it won’t hasten the timeline for cuts, either.

Statistics Canada said Tuesday that the annual inflation rate ticked up to 3.4 per cent in December, thanks to gas prices and still sticky price hikes at the grocery store.

That’s up from the November inflation rate of 3.1 per cent.

Economists had widely expected a temporary inflation spike, owed largely to a smaller drop in gasoline prices in December compared with a year ago. Gas prices have declined for the fourth consecutive month, StatCan says.

Prices at the grocery store rose 4.7 per cent annually last month, StatCan says, the same pace seen in November.

Shelter inflation such as climbing rent and mortgage costs continued to drive the cost of living higher in December.

Canadians paid 31.1 per cent more for air transportation in December than in November as the holiday season pushed up demand for airfare, StatCan says. Cheaper prices on travel tours month-to-month helped moderate this pressure.

Higher costs for fuel oil and passenger vehicles were also contributing to inflation last month, the agency says.

With December marking the last month of the year, Statistics Canada says the annual average inflation rate for 2023 was 3.9 per cent, down from a 40-year high of 6.8 per cent in 2022.

The latest inflation print comes a day after the Bank of Canada released its quarterly business outlook survey, which showed fewer firms are planning steep and frequent price hikes in the year to come.

RBC economist Claire Fan says that while business pricing behaviours haven’t fully normalized yet, the Bank of Canada’s surveys suggest inflation should be less intense in 2024.

 

Inflation report will put Bank of Canada in ‘cautious stance’

Tuesday’s report comes about a week ahead of the Bank of Canada’s next interest rate decision set for Jan. 24. The central bank has held its policy rate steady at 5.0 per cent in the past three decisions, and has warned that rates might need to rise higher to fully bring inflation back to its two per cent target even as many forecasters start to pencil in rate cuts later this year.

While the uptick in headline inflation might have been expected, there were signs of acceleration in the central bank’s closely watched metrics of core inflation, too.

BMO chief economist Doug Porter said in a note to clients Tuesday that core inflation holding around mid-three per cent range will be “unsettling news” for the Bank of Canada, proving that the so-called “last mile” of the inflation fight will be the hardest.

With wage growth still elevated and signs that the housing market might be waking up from its hibernation, Porter argued that the central bank will have to hold a “cautious stance” in next week’s decision. He reiterated BMO’s call for interest rate cuts to begin in June.

TD Bank economist Leslie Preston also said the December inflation report will pour water on calls for an easing in the Bank of Canada’s policy rate.

“If you are looking for data to signal a rate cut is imminent, this isn’t it,” she wrote in a note.

TD Bank nonetheless has a more aggressive timeline for easing to begin, expecting the first cut in April. Preston said she expects inflation and the wider economy will have slowed enough to give the Bank of Canada confidence that inflation is heading back to two per cent to start easing monetary policy by then.

Fan says she expects the inflation release on its own won’t be “too concerning” for the central bank heading into next week’s rate decision.

Signs of deterioration elsewhere in the economy and a softening in the labour market give RBC the confidence that the sticky core inflation metrics will eventually begin to ease; the question remaining is how long that will take, she says.

“That, in a way, just really warrants this slow approach. The Bank is in no rush to cut rates,” she says.

Fan expects the Bank of Canada will hold its policy rate steady on Jan. 24 and keep the same posture it had at the end of 2023, keeping hints for rate cuts off the table until it’s seen more inflation prints in 2024 and another round of business surveys.

RBC expects the Bank of Canada will pivot to rate cuts around mid-year. Fan notes that risks of an inflationary stall pushing back the timeline for rate cuts and risks of a steeper economic downturn moving forward the schedule for easing are “pretty evenly distributed” at this juncture.

Possible stalls in the Bank of Canada’s inflation fight come as the economy continues to show signs of slowing.

Andrew DiCapua, senior economist at the Canadian Chamber of Commerce, tells Global News that the central bank will have a tough job trying to avoid tilting the economy into a recession while ensuring it tamps inflation all the way back down to two per cent – the coveted “soft landing” scenario.

He also says that the Bank of Canada, while it operates independently, will feel pressure to keep its policy rate moves close to those of the United States Federal Reserve. The exchange rate of the Canadian and U.S. dollars are closely tied to the country’s central bank rates, and too much of a divergence here could fuel inflation on trade between the nations, he notes.

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While inflation in the U.S. has also clocked in at 3.4 per cent in its latest reading, DiCapua says the Fed likely has a bit more bandwidth to work with in its own inflation fight because the economy south of the border is still running strong. That gives the Fed more “leeway” to run its interest rates higher for longer to tame inflation without tanking the economy, he says.

“I think the United States is definitely more in the soft landing camp, whereas Canada is really growing at about zero per cent, and we could dip into recession in the second half of this year,” DiCapua says.

Officials at the U.S. Fed have recently signalled that there could be as many as three interest rate cuts from that central bank in 2024. Wall Street investors and many economists expect the first cut in March.

However, the Bank of Canada diverged from the tone taken by the Fed last month.

“The Fed is going to do what they need to do. We’re going to focus on what needs to be done here in Canada,” Governor Tiff Macklem told a business audience in Toronto after a speech in December.

“We have not started having that discussion (about cutting rates), because it’s too early to have that discussion. We’re still discussing whether we raised interest rates enough and how long they need to stay where they are.”

A top Federal Reserve official said Tuesday that he is increasingly confident that inflation will continue falling this year back to the Fed’s two per cent target level.

The official, Christopher Waller, an influential member of the Fed’s Board of Governors, noted that inflation is slowing even as growth and hiring remain solid — a combination that he called “almost as good as it gets.”

“The progress I have noted on inflation, combined with the data in hand on economic and financial conditions and my outlook has made me more confident than I have been since 2021 that inflation is on a path to per cent,” Waller said in written remarks to the Brookings Institution.

Waller meanwhile cautioned that the Fed might not cut rates as urgently as many on Wall Street have envisioned. He noted that the economy is continuing to expand, with the unemployment rate at just 3.7%, not far above a half-century low, while inflation cools.

“But will it last?” he asked.

Fed officials, he added, will want to see further evidence that inflation is still on track to two per cent before embarking on rate cuts.

“We can take our time to make sure we do this right,” he said.

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Bad traffic, changed plans: Toronto braces for uncertainty of its Taylor Swift Era

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TORONTO – Will Taylor Swift bring chaos or do we all need to calm down?

It’s a question many Torontonians are asking this week as the city braces for the arrival of Swifties, the massive fan base of one of the world’s biggest pop stars.

Hundreds of thousands are expected to descend on the downtown core for the singer’s six concerts which kick off Thursday at the Rogers Centre and run until Nov. 23.

And while their arrival will be a boon to tourism dollars — the city estimates more than $282 million in economic impact — some worry it could worsen Toronto’s gridlock by clogging streets that already come to a standstill during rush hour.

Swift’s shows are set to collide with sports events at the nearby Scotiabank Arena, including a Raptors game on Friday and a Leafs game on Saturday.

Some residents and local businesses have already adjusted their plans to avoid the area and its planned road closures.

Aahil Dayani says he and some friends intended to throw a birthday bash for one of their pals until they realized it would overlap with the concerts.

“Something as simple as getting together and having dinner is now thrown out the window,” he said.

Dayani says the group rescheduled the gathering for after Swift leaves town. In the meantime, he plans to hunker down at his Toronto residence.

“Her coming into town has kind of changed up my social life,” he added.

“We’re pretty much just not doing anything.”

Max Sinclair, chief executive and founder of A.I. technology firm Ecomtent, suggested his employees avoid the company’s downtown offices on concert days, saying he doesn’t see the point in forcing people to endure potential traffic jams.

“It’s going to be less productive for us, and it’s going to be just a pain for everyone, so it’s easier to avoid it,” Sinclair said.

“We’re a hybrid company, so we can be flexible. It just makes sense.”

Swift’s concerts are the latest pop culture moment to draw attention to Toronto’s notoriously disastrous daily commute.

In June, One Direction singer Niall Horan uploaded a social media video of himself walking through traffic to reach the venue for his concert.

“Traffic’s too bad in Toronto, so we’re walking to the venue,” he wrote in the post.

Toronto Transit Commission spokesperson Stuart Green says the public agency has been working for more than a year on plans to ease the pressure of so many Swifties in one confined area.

“We are preparing for something that would be akin to maybe the Beatles coming in the ‘60s,” he said.

Dozens of buses and streetcars have been added to transit routes around the stadium, and the TTC has consulted the city on potential emergency scenarios.

Green will be part of a command centre operated by the City of Toronto and staffed by Toronto police leaders, emergency services and others who have handled massive gatherings including the Raptors’ NBA championship parade in 2019.

“There may be some who will say we’re over-preparing, and that’s fair,” Green said.

“But we know based on what’s happened in other places, better to be over-prepared than under-prepared.”

Metrolinx, the agency for Ontario’s GO Transit system, has also added extra trips and extended hours in some regions to accommodate fans looking to travel home.

A day before Swift’s first performance, the city began clearing out tents belonging to homeless people near the venue. The city said two people were offered space in a shelter.

“As the area around Rogers Centre is expected to receive a high volume of foot traffic in the coming days, this area has been prioritized for outreach work to ensure the safety of individuals in encampments, other residents, businesses and visitors — as is standard for large-scale events,” city spokesperson Russell Baker said in a statement.

Homeless advocate Diana Chan McNally questioned whether money and optics were behind the measure.

“People (in the area) are already in close proximity to concerts, sports games, and other events that generate massive amounts of traffic — that’s nothing new,” she said in a statement.

“If people were offered and willingly accepted a shelter space, free of coercion, I support that fully — that’s how it should happen.”

This report by The Canadian Press was first published Nov. 13, 2024.



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‘It’s literally incredible’: Swifties line up for merch ahead of Toronto concerts

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TORONTO – Hundreds of Taylor Swift fans lined up outside the gates of Toronto’s Rogers Centre Wednesday, with hopes of snagging some of the pop star’s merchandise on the eve of the first of her six sold-out shows in the city.

Swift is slated to perform at the venue from Thursday to Saturday, and the following week from Nov. 21 to Nov. 23, with concert merchandise available for sale on some non-show days.

Swifties were all smiles as they left the merch shop, their arms full of sweaters and posters bearing pictures of the star and her Eras Tour logo.

Among them was Zoe Haronitis, 22, who said she waited in line for about two hours to get $300 worth of merchandise, including some apparel for her friends.

Haronitis endured the autumn cold and the hefty price tag even though she hasn’t secured a concert ticket. She said she’s hunting down a resale ticket and plans to spend up to $600.

“I haven’t really budgeted anything,” Haronitis said. “I don’t care how much money I spent. That was kind of my mindset.”

The megastar’s merchandise costs up to $115 for a sweater, and $30 for tote bags and other accessories.

Rachel Renwick, 28, also waited a couple of hours in line for merchandise, but only spent about $70 after learning that a coveted blue sweater and a crewneck had been snatched up by other eager fans before she got to the shop. She had been prepared to spend much more, she said.

“The two prized items sold out. I think a lot more damage would have been done,” Renwick said, adding she’s still determined to buy a sweater at a later date.

Renwick estimated she’s spent about $500 in total on “all-things Eras Tour,” including her concert outfit and merchandise.

The long queue for Swift merch is just a snapshot of what the city will see in the coming days. It’s estimated that up to 500,000 visitors from outside Toronto will be in town during the concert period.

Tens of thousands more are also expected to attend Taylgate’24, an unofficial Swiftie fan event scheduled to be held at the nearby Metro Toronto Convention Centre.

Meanwhile, Destination Toronto has said it anticipates the economic impact of the Eras Tour could grow to $282 million as the money continues to circulate.

But for fans like Haronitis, the experience in Toronto comes down to the Swiftie community. Knowing that Swift is going to be in the city for six shows and seeing hundreds gather just for merchandise is “awesome,” she said.

Even though Haronitis hasn’t officially bought her ticket yet, she said she’s excited to see the megastar.

“It’s literally incredible.”

This report by The Canadian Press was first published Nov. 13, 2024.

The Canadian Press. All rights reserved.



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Via Rail seeks judicial review on CN’s speed restrictions

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OTTAWA – Via Rail is asking for a judicial review on the reasons why Canadian National Railway Co. has imposed speed restrictions on its new passenger trains.

The Crown corporation says it is seeking the review from the Federal Court after many attempts at dialogue with the company did not yield valid reasoning for the change.

It says the restrictions imposed last month are causing daily delays on Via Rail’s Québec City-Windsor corridor, affecting thousands of passengers and damaging Via Rail’s reputation with travellers.

CN says in a statement that it imposed the restrictions at rail crossings given the industry’s experience and known risks associated with similar trains.

The company says Via has asked the courts to weigh in even though Via has agreed to buy the equipment needed to permanently fix the issues.

Via said in October that no incidents at level crossings have been reported in the two years since it put 16 Siemens Venture trains into operation.

This report by The Canadian Press was first published Nov. 13, 2024.

Companies in this story: (TSX:CN)

The Canadian Press. All rights reserved.



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