Business

US Fed officials weigh shrinking balance sheet by US$95B a month – BNN

Published

2 years ago

April 6, 2022

The Federal Reserve signaled it will reduce its massive bond holdings at a maximum pace of US$95 billion a month, further tightening credit across the economy as the central bank raises interest rates to cool the hottest inflation in four decades.

Minutes of their March meeting released Wednesday also showed that “many” officials would have favored raising rates by a half-percentage point last month — but deferred to a quarter-point move in light of Russia’s invasion of Ukraine — and viewed one or more half-point increases as possibly appropriate going forward if price pressures fail to moderate.

They proposed shrinking the Fed’s balance sheet at a maximum monthly pace of US$60 billion in Treasuries and US$35 billion in mortgage-backed securities, which is nearly double the peak rate of US$50 billion a month the last time the Fed trimmed its balance sheet from 2017 to 2019.

“Participants also generally agreed that the caps could be phased in over a period of three months or modestly longer if market conditions warrant,” minutes of the March 15-16 Federal Open Market Committee meeting said.

MAY MEETING

The FOMC is expected to approve the balance-sheet reduction at its next gathering May 3-4. The roadmap for shrinking the balance sheet came via a staff presentation to officials.

“Participants agreed they had made substantial progress on the plan and that the Committee was well placed to begin the process of reducing the size of the balance sheet as early as after the conclusion of its upcoming meeting in May,” the minutes said.

Long-term Treasury yields oscillated as investors digested the minutes, with the gap between 2- and 10-year yields extending a steepening move on the day. The S&P 500 index pared losses.

The move to reduce the balance sheet will extend a sharp pivot toward fighting inflation, as the Fed was buying bonds as recently as last month as it attempted a smooth wind-down of pandemic support.

U.S. central bankers raised interest rates by a quarter percentage point at the March meeting, lifting them from near zero where they had been held since March 2020 as the pandemic spread. They signaled a further six such moves this year to cool the hottest inflation in four decades. Shrinking the size of their balance sheet, which ballooned to US$8.9 trillion as they aggressively bought bonds to shield the economy from COVID-19, will also help to tighten financial conditions.

JUMBO HIKES

“Many participants noted that one or more 50 basis point increases in the target range could be appropriate at future meetings, particularly if inflation pressures remained elevated or intensified,” the minutes said, adding that “participants judged that it would be appropriate to move the stance of monetary policy toward a neutral posture expeditiously.”

“The US$95 billion in runoff is in line with what the market was thinking and it means they don’t have to resort to outright sales,” said Karl Haeling, capital markets director at German bank LBBW in New York. Now markets will position around how many 50 basis points they will do this year with the perception that “there is a rush to get to neutral because they are so far behind.”

The neutral rate is a theoretical level that neither speeds up nor slows down economic activity and is estimated to lie around 2.4 per cent, according to the median estimate of officials released at the meeting. Officials “also noted that, depending on economic and financial developments, a move to a tighter policy stance could be warranted,” the minutes said.

Policy makers since then have said they could move more rapidly on policy, after Russian’s invasion of Ukraine sent food and energy prices soaring, with Chair Jerome Powell declaring that a half-point increase was on the table if needed for their May 3-4 policy meeting.

“Fifty basis point rate hikes are in fact on the table and more than one of them is in fact possible,” Seth Carpenter, chief global economist at Morgan Stanley, told Bloomberg Television. “But what we did not here in the minutes is that they were set up to do 50 basis points at every meeting. That super-hawkish outcome has been ruled out. The Fed is still in a little bit of a balancing act.”

Investors have priced in the possibility of more than seven rate increases in 2022 as inflation pressures spread, and see a high chance the Fed will raise rates by a half point next month. The total hikes for all of 2022 edged lower, though with still over eight quarter point hikes priced in.

The consumer price index soared 7.9 per cent in February, the most since 1982. The Fed’s 2 per cent inflation target is based on a separate measure, the personal consumption expenditures price index, which rose 6.4 per cent in the 12 months through February. Meanwhile, U.S. labor markets remain strong with the unemployment rate dipping to 3.6 per cent last month as employers added 431,000 jobs.

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Business

TD CEO to retire next year, takes responsibility for money laundering failures

Published

5 hours ago

September 19, 2024

Anne Joseph

TORONTO – TD Bank Group, which is mired in a money laundering scandal in the U.S., says chief executive Bharat Masrani will retire next year.

Masrani, who will retire officially on April 10, 2025, says the bank’s, “anti-money laundering challenges,” took place on his watch and he takes full responsibility.

The bank named Raymond Chun, TD’s group head, Canadian personal banking, as his successor.

As part of a transition plan, Chun will become chief operating officer on Nov. 1 before taking over the top job when Masrani steps down at the bank’s annual meeting next year.

TD also announced that Riaz Ahmed, group head, wholesale banking and president and CEO of TD Securities, will retire at the end of January 2025.

TD has taken billions in charges related to ongoing U.S. investigations into the failure of its anti-money laundering program.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:TD)

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Business

The #1 Skill I Look For When Hiring

Published

2 days ago

September 17, 2024

Nick Kossovan

File this column under “for what it’s worth.”

“Communication is one of the most important skills you require for a successful life.” — Catherine Pulsifer, author.

I’m one hundred percent in agreement with Pulsifer, which is why my evaluation of candidates begins with their writing skills. If a candidate’s writing skills and verbal communication skills, which I’ll assess when interviewing, aren’t well above average, I’ll pass on them regardless of their skills and experience.

Why?

Because business is fundamentally about getting other people to do things—getting employees to be productive, getting customers to buy your products or services, and getting vendors to agree to a counteroffer price. In business, as in life in general, you can’t make anything happen without effective communication; this is especially true when job searching when your writing is often an employer’s first impression of you.

Think of all the writing you engage in during a job search (resumes, cover letters, emails, texts) and all your other writing (LinkedIn profile, as well as posts and comments, blogs, articles, tweets, etc.) employers will read when they Google you to determine if you’re interview-worthy.

With so much of our communication today taking place via writing (email, text, collaboration platforms such as Microsoft Teams, Slack, ClickUp, WhatsApp and Rocket.Chat), the importance of proficient writing skills can’t be overstated.

When assessing a candidate’s writing skills, you probably think I’m looking for grammar and spelling errors. Although error-free writing is important—it shows professionalism and attention to detail—it’s not the primary reason I look at a candidate’s writing skills.

The way someone writes reveals how they think.

Clear writing = Clear thinking
Structured paragraphs = Structured mind
Impactful sentences = Impactful ideas

Effective writing isn’t about using sophisticated vocabulary. Hemingway demonstrated that deceptively simple, stripped-down prose can captivate readers. Effective writing takes intricate thoughts and presents them in a way that makes the reader think, “Damn! Why didn’t I see it that way?” A good writer is a dead giveaway for a good thinker. More than ever, the business world needs “good thinkers.”

Therefore, when I come across a candidate who’s a good writer, hence a good thinker, I know they’re likely to be able to write:

Emails that don’t get deleted immediately and are responded to
Simple, concise, and unambiguous instructions
Pitches that are likely to get read
Social media content that stops thumbs
Human-sounding website copy
Persuasively, while attuned to the reader’s possible sensitivities

Now, let’s talk about the elephant in the room: AI, which job seekers are using en masse. Earlier this year, I wrote that AI’s ability to hyper-increase an employee’s productivity—AI is still in its infancy; we’ve seen nothing yet—in certain professions, such as writing, sales and marketing, computer programming, office and admin, and customer service, makes it a “fewer employees needed” tool, which understandably greatly appeals to employers. In my opinion, the recent layoffs aren’t related to the economy; they’re due to employers adopting AI. Additionally, companies are trying to balance investing in AI with cost-cutting measures. CEOs who’ve previously said, “Our people are everything,” have arguably created today’s job market by obsessively focusing on AI to gain competitive advantages and reduce their largest expense, their payroll.

It wouldn’t be a stretch to assume that most AI usage involves generating written content, content that’s obvious to me, and likely to you as well, to have been written by AI. However, here’s the twist: I don’t particularly care.

Why?

Because the fundamental skill I’m looking for is the ability to organize thoughts and communicate effectively. What I care about is whether the candidate can take AI-generated content and transform it into something uniquely valuable. If they can, they’re demonstrating the skills of being a good thinker and communicator. It’s like being a great DJ; anyone can push play, but it takes skill to read a room and mix music that gets people pumped.

Using AI requires prompting effectively, which requires good writing skills to write clear and precise instructions that guide the AI to produce desired outcomes. Prompting AI effectively requires understanding structure, flow and impact. You need to know how to shape raw information, such as milestones throughout your career when you achieved quantitative results, into a compelling narrative.

So, what’s the best way to gain and enhance your writing skills? As with any skill, you’ve got to work at it.

Two rules guide my writing:

Use strong verbs and nouns instead of relying on adverbs, such as “She dashed to the store.” instead of “She ran quickly to the store.” or “He whispered to the child.” instead of “He spoke softly to the child.”
Avoid using long words when a shorter one will do, such as “use” instead of “utilize” or “ask” instead of “inquire.” As attention spans get shorter, I aim for clarity, simplicity and, most importantly, brevity in my writing.

Don’t just string words together; learn to organize your thoughts, think critically, and communicate clearly. Solid writing skills will significantly set you apart from your competition, giving you an advantage in your job search and career.

_____________________________________________________________________

Nick Kossovan, a well-seasoned veteran of the corporate landscape, offers “unsweetened” job search advice. You can send Nick your questions to artoffindingwork@gmail.com.

Business

Politics likely pushed Air Canada toward deal with ‘unheard of’ gains for pilots

Published

3 days ago

September 16, 2024

Anne Joseph

MONTREAL – Politics, public opinion and salary hikes south of the border helped push Air Canada toward a deal that secures major pay gains for pilots, experts say.

Hammered out over the weekend, the would-be agreement includes a cumulative wage hike of nearly 42 per cent over four years — an enormous bump by historical standards — according to one source who was not authorized to speak publicly on the matter. The previous 10-year contract granted increases of just two per cent annually.

The federal government’s stated unwillingness to step in paved the way for a deal, noted John Gradek, after Prime Minister Justin Trudeau made it plain the two sides should hash one out themselves.

“Public opinion basically pressed the federal cabinet, including the prime minister, to keep their hands clear of negotiations and looking at imposing a settlement,” said Gradek, who teaches aviation management at McGill University.

After late-night talks at a hotel near Toronto’s Pearson airport, the country’s biggest airline and the union representing 5,200-plus aviators announced early Sunday morning they had reached a tentative agreement, averting a strike that would have grounded flights and affected some 110,000 passengers daily.

The relative precariousness of the Liberal minority government as well as a push to appear more pro-labour underlay the prime minister’s hands-off approach to the negotiations.

Trudeau said Friday the government would not step in to fix the impasse — unlike during a massive railway work stoppage last month and a strike by WestJet mechanics over the Canada Day long weekend that workers claimed road roughshod over their constitutional right to collective bargaining. Trudeau said the government respects the right to strike and would only intervene if it became apparent no negotiated deal was possible.

“They felt that they really didn’t want to try for a third attempt at intervention and basically said, ‘Let’s let the airline decide how they want to deal with this one,'” said Gradek.

“Air Canada ran out of support as the week wore on, and by the time they got to Friday night, Saturday morning, there was nothing left for them to do but to basically try to get a deal set up and accepted by ALPA (Air Line Pilots Association).”

Trudeau’s government was also unlikely to consider back-to-work legislation after the NDP tore up its agreement to support the Liberal minority in Parliament, Gradek said. Conservative Leader Pierre Poilievre, whose party has traditionally toed a more pro-business line, also said last week that Tories “stand with the pilots” and swore off “pre-empting” the negotiations.

Air Canada CEO Michael Rousseau had asked Ottawa on Thursday to impose binding arbitration pre-emptively — “before any travel disruption starts” — if talks failed. Backed by business leaders, he’d hoped for an effective repeat of the Conservatives’ move to head off a strike in 2012 by legislating Air Canada pilots and ground crew to stick to their posts before any work stoppage could start.

The request may have fallen flat, however. Gradek said he believes there was less anxiety over the fallout from an airline strike than from the countrywide railway shutdown.

He also speculated that public frustration over thousands of cancelled flights would have flowed toward Air Canada rather than Ottawa, prompting the carrier to concede to a deal yielding “unheard of” gains for employees.

“It really was a total collapse of the Air Canada bargaining position,” he said.

Pilots are slated to vote in the coming weeks on the four-year contract.

Last year, pilots at Delta Air Lines, United Airlines and American Airlines secured agreements that included four-year pay boosts ranging from 34 per cent to 40 per cent, ramping up pressure on other carriers to raise wages.

After more than a year of bargaining, Air Canada put forward an offer in August centred around a 30 per cent wage hike over four years.

But the final deal, should union members approve it, grants a 26 per cent increase in the first year alone, retroactive to September 2023, according to the source. Three wage bumps of four per cent would follow in 2024 through 2026.

Passengers may wind up shouldering some of that financial load, one expert noted.

“At the end of the day, it’s all us consumers who are paying,” said Barry Prentice, who heads the University of Manitoba’s transport institute.

Higher fares may be mitigated by the persistence of budget carrier Flair Airlines and the rapid expansion of Porter Airlines — a growing Air Canada rival — as well as waning demand for leisure trips. Corporate travel also remains below pre-COVID-19 levels.

Air Canada said Sunday the tentative contract “recognizes the contributions and professionalism of Air Canada’s pilot group, while providing a framework for the future growth of the airline.”

The union issued a statement saying that, if ratified, the agreement will generate about $1.9 billion of additional value for Air Canada pilots over the course of the deal.

Meanwhile, labour tension with cabin crew looms on the horizon. Air Canada is poised to kick off negotiations with the union representing more than 10,000 flight attendants this year before the contract expires on March 31.

This report by The Canadian Press was first published Sept. 16, 2024.

Companies in this story: (TSX:AC)

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