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‘We are getting closer’ to cutting interest rates, Bank of Canada governor tells MPs

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The Bank of Canada is getting closer to cutting interest rates as inflation shows signs of coming down and staying down, the central bank’s governor, Tiff Macklem, told MPs Thursday.

“We do see renewed downward momentum in underlying inflation. The message to Canadians is: we are getting closer. We are seeing what we need to see and we just need to be confident that it will be sustained,” Macklem said during an appearance before the House of Commons finance committee.

Economic growth has stalled, there’s an excess supply of goods, wage increases have stabilized and the labour market has cooled “from very overheated levels,” which has helped to bring down prices, Macklem said.

“Our key indicators of inflation have all moved in the right direction,” he said, pointing at data that strips out more volatile price swings, like food and energy prices.

The next opportunity for the central bank to possibly cut rates is June 5.

Macklem’s upbeat tone could be good news for homeowners and would-be buyers who have been forced to buy or refinance a home with interest rates at 20-year highs.

 

Bank of Canada wants to see ‘sustained’ progress in fight against inflation, Macklem says

 

Tiff Macklem, governor of the Bank of Canada, says he knows people want answers about when rates in Canada might change. Macklem says key inflation indicators are moving in the right direction, but added that the central bank will still be ‘closely watching the evolution of core inflation’ in the months ahead.

He said the bank’s current policy rate of five per cent has been “restraining” demand for homes.

But the Bank of Canada is now projecting “a strong pick-up in housing over the course of this year” with “some increase in housing prices,” Macklem said.

Acknowledging that higher rates have been hard on Canadians and some sectors of the economy like real estate, Macklem said the bank doesn’t “want to keep monetary policy this restrictive for longer than we have to.”

Macklem’s relatively rosy outlook on rates differs somewhat from Jerome Powell, the chair of the U.S. Federal Reserve, the body that sets interest rates in that country.

The Fed held interest rates steady on Wednesday.

“Inflation is still too high,” Powell said. “Further progress in bringing it down is not assured and the path forward is uncertain.”

Worries about Canadian dollar

Macklem said there’s a reason inflation has come down more here than in the U.S. — Canada’s economy has been weaker than south of the border.

“We have our own currency — we can run our own monetary policy,” Macklem said, while adding that a decision to cut rates while the U.S. stands pat could have an “impact on the Canadian dollar.”

 

Canada’s inflation rate ticks up to 2.9% in March

 

The consumer price index shows inflation was at 2.9% in March compared to the year before, a slight increase compared to February. Statistics Canada said gasoline prices, mortgage interest costs and rent contributed to the increased inflation rate.

“If we move lower than the Fed, that will tend to depreciate the Canadian dollar,” he said.

That could be problematic for vacationers and frequent cross-border travellers, but a weaker loonie could also be a boon for the Canadian economy, as our exports become cheaper.

 

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Japan’s SoftBank returns to profit after gains at Vision Fund and other investments

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TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.

Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.

Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).

SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.

The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.

WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.

SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.

SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.

SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.

The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.

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Yuri Kageyama is on X:

The Canadian Press. All rights reserved.

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Trump campaign promises unlikely to harm entrepreneurship: Shopify CFO

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Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.

“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.

“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”

Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.

On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.

If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.

These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.

If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.

However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.

He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.

“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.

Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.

The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.

Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.

Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.

Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.

Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.

Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”

In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.

“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.

This report by The Canadian Press was first published Nov. 12, 2024.

Companies in this story: (TSX:SHOP)

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RioCan cuts nearly 10 per cent staff in efficiency push as condo market slows

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TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.

The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.

The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.

RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.

The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.

RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.

This report by The Canadian Press was first published Nov. 12, 2024.

Companies in this story: (TSX:REI.UN)

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