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Why central banks hope you think prices are rising: Don Pittis – CBC.ca

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Do you feel as if the things you buy every day are getting more expensive?

If you live in North America or Europe, your local central bankers might be pleased to hear that. And it’s not because they want you to suffer.

Instead they hope that if you expect inflation when the latest numbers come out next Wednesday, that’s what’s going to happen.

This week, Canadians get a fresh perspective on where inflation is heading through a brand new set of data coming from the Bank of Canada later today. And while most of us dislike rising prices, odds are economists at the European Central Bank and the U.S. Federal Reserve will be very jealous of Canada’s numbers.

At the end of last week, the vice-chair of the Fed, economist Richard Clarida, warned that the U.S. central bank would have to keep struggling against what he called “global disinflationary pressures.”

What did you expect?

While the central bankers’ fear of falling prices seems to be abating, many, like Clarida, worry that a slowing rate of price growth — where prices rise, but well below the two per cent inflation target — will gradually take the world back to its nemesis, deflation.

At its last interest rate announcement, the Fed said it would keep interest rates on hold in 2020 after a series of cuts. But the Fed vice-chair then hinted last week that more cuts might be needed.

“The global disinflationary pressures which I referred to are very powerful forces and policy needs to factor that in in setting policy to get inflation up to the objective,” said Clarida.

Boxing Day shoppers in Ottawa, looking for deals. Rising inflation allows central banks to increase interest rates, creating the ability to cut in the case of a downturn. (Patrick Doyle/Canadian Press)

Most economists used to imagine inflation in a relatively simple, mechanical way: Based on the idea of the Phillips curve, strong employment leads to higher inflation, and cutting interest rates makes prices rise.

But now there are increasing doubts about those relationships.

Instead, much more weight is given to inflation expectations. In other words, if you and all your friends think prices won’t rise, they won’t.

It is a strange and circular argument, but research partly financed by the Bank of Canada has shown it has a basis in fact.

New data on consumer views

Unbeknownst to most Canadians, the central bank has been collecting data on our inflation expectations since 2014. It will publish some of that information later today in its first Canadian Survey of Consumer Expectations.

The data — based on consumer interviews with a rotating cast of 1,000 heads of households — probes not just what inflation will be at the next release, but consumer expectations for the months and years ahead.

“Since expected inflation influences current wage negotiations, price setting and financial contracting for investment, it is one of the main drivers of current inflation,” reads a 2015 report explaining how the survey works.

But as Bank of Canada governor Stephen Poloz explained last week, adjusting those expectations once they have become deeply rooted in consumer thought is not necessarily easy.

“You make a forecast of inflation one to two years from now and ask where that’s going to be relative to your target,” said Poloz, outlining how the bank tried to bend expectations, and thus the eventual rate of inflation.

People might not like rising prices, but central banks are convinced it is better than the opposite. (Graeme Roy/The Canadian Press)

But, as he explained, that depends where the current rate is relative to the target, and whether the economy is strong or if it is weak, needing stimulus. 

In Canada, inflation expectations likely currently sit slightly above the bank’s two per cent target rate (though we will find out today), and the central bank is in a relatively happy position.

Theoretically, if needed, the bank should be able to nudge those long-term expectations up or down by nudging interest rates lower or higher respectively.

That is not so easy in other places, such as parts of Europe, where even low and negative interest rates have failed to push prices up in any substantial way.

There are things that could trigger inflation expectations, such as a sudden economic boom in some part of the world, or, as we saw last week, the threat of war that would cause emergency spending and perhaps shortages of raw materials, if oilfields were cut off, for example.

But far more worrying for central bankers in countries where both inflation expectations and interest rates are low is what they will do if a new recession that many worry may still be around the corner were to make an appearance.

Whereas Canada would still have room to cut and stimulate the economy with lower interest rates, others would once again face the distorting effects of other forms of stimulation, from negative interest rates to bond buying, which have proved less successful in practise than many economic theorists had hoped. 


Follow Don on Twitter @don_pittis

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Roy Green: When it counts in Canada, there is no national consensus – Global News

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Seeking national consensus is a largely wasted exercise in matters of true national significance.

Sure, we shout our unqualified support for Canada on the easy ones like cheering Team Canada to Olympic or World Championship hockey titles, but on critical matters which should serve to remind we’re all in this Canadian thing together, our confederation is coming unglued.

The last several weeks serve as a case in point.


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Via Rail to resume partial service on Eastern Canada routes starting Tuesday

National laws went up in the acrid smoke of burning tires. Law enforcement, from local gendarmes all the way to the national police, stood helplessly by — literally — as so-called protesters ground much of Canada’s rail system to a halt, harming everything from the nation writ large to small business entrepreneurial efforts in the process.

When “Shut down Canada” becomes the effective battle cry of unopposed anarchy, the immediate outlook becomes what, exactly?

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The Wet’suwet’en hereditary chiefs in their very public opposition to pipelines exposed the faultlines upon which Canada’s uneasy foundation rests today.

Ours is a divided nation in which the drum beat of regionalism grows.  Quebec returned to electing sovereignists in large numbers last Oct. 21, while Alberta and Saskatchewan changed the locks and refused to send even one Liberal candidate to Parliament. Think about that.

Is it possible — or perhaps likely — that Alberta and Saskatchewan will, through the din of public opinion, hold referenda on exiting Canada within, say, five years?

I’ve heard claims of concern for “national unity” from premiers Scott Moe and Jason Kenney repeatedly in interviews, while in a conversation not long ago, Premier Blaine Higgs of New Brunswick declared we must decide whether Canada is “a nation or a notion.”


READ MORE:
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In recent weeks, as the current crisis lurches along, the word “reconciliation” has been repeated constantly, but is that what the pipeline disruptions are really about?

After all, First Nation band councils support Coastal GasLink LNG pipeline in northern B.C., as, similarly, First Nations in Alberta supported the now-vanished TECK Frontier oilsands mine.

Reconciliation should begin with proper housing, safe drinking water and providing Indigenous youth with support and engagement which, in turn, would drive away thoughts of and even acts of self-harm and suicide.

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Canada today suffers from a dearth of visionary leadership at the national level.  I don’t know if that kind of leadership is even possible, but this nation certainly could use one or more — and quickly.

Roy Green is the host of the Roy Green Show on the Global News Radio network.

Listen to the latest from the Roy Green Show

Subscribe to the Roy Green Show Podcast now at Apple Podcast or Google Play

© 2020 Global News, a division of Corus Entertainment Inc.

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What's next for Canada if the WHO calls COVID-19 a pandemic? – CBC.ca

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As global tensions mount over the spread of COVID-19, Canada is crafting its own plan to respond to what could become a pandemic.

The World Health Organization (WHO) has declared COVID-19, a respiratory illness caused by the novel coronavirus, an international health emergency. But so far it has resisted using the label “pandemic” — in part because of the panic that could inspire.

On Friday, the WHO elevated the global risk level to “very high,” but Canadian officials maintain the risk here remains low. Fourteen cases have been confirmed to date — seven in British Columbia, seven in Ontario and another unconfirmed case in Quebec.

Officials say preparations are well underway to respond to a global pandemic and a domestic outbreak.

Deputy Prime Minister Chrystia Freeland said that while the government is concerned, Canadians need to take the situation seriously without surrendering to fear.

“I really want people to be confident and reassured that there is a very elaborate, very detailed scenario in place for what we should do,” she told host Chris Hall in an interview with CBC Radio One’s The House airing Saturday.

Here’s what might change if the WHO declares a pandemic, and how Canadians could be affected.

What would authorities do to limit the spread?

Canada’s Chief Public Health Officer Dr. Theresa Tam told CBC News Network’s Power & Politics that federal, provincial and community health officials have kicked into high gear to prepare for wider transmission of the virus.

Pandemic plans have been developed already and will adapt to any evolving scenario, she said.

“There are going to be some tough decisions that health systems have to make when there are a lot of patients, including prioritizing your beds for those who are most in need. You may need to cancel elective surgeries and that type of thing,” she told host Vassy Kapelos.

Infectious diseases specialist Dr. Michael Gardam said a basic premise of any public health pandemic plan is “social distancing,” which could include closing schools and universities and cancelling public gatherings.

“They don’t stop the virus but they slow it down,” he told The House, adding that a delayed outbreak could ease pressure on hospitals already burdened by the busy flu season.

After the 2003 SARS epidemic, which caught many health professionals off-guard, Canada built up public health infrastructure and medical stockpiles to prepare for future emergencies. Gardham said that now makes Canada better prepared than many other countries to respond to a pandemic — with the caveat that most of the country’s hospitals are now at 100 per cent capacity.

Could there be community quarantines?

Decisions on how to isolate infected persons will be made by local and provincial health authorities. Their approaches could range from recommended self-isolation, to hospitalization, to quarantine.

Tam said public health systems are adept at assessing and isolating people who are contagious and managing infectious diseases.

Canada’s Chief Public Health Officer Dr. Theresa Tam says federal, provincial and community health officials have kicked into high gear to prepare for wider transmission of the coronavirus. 10:12

“So you might see certain settings where exposures could have occurred and that local public health officials will make a determination, and groups of people may need to be in a quarantine,” she said during a briefing with reporters this week.

Toronto’s Medical Officer of Health Dr. Eileen de Villa said that in the event of a pandemic, the city would operate under emergency response protocols. Legislative powers for quarantines come under the Provincial Health Protection and Promotion Act, she told CBC News.

Steps to limit spread of the virus would be assessed and taken after officials weighed the need to prevent the spread of infection against the need for communities to function.

“We are closely watching the global epidemiology and response measures elsewhere including the effectiveness of increased public health measures such as postponing large gatherings,” de Villa said.

“Other actions that could be considered could include postponement of events, or limiting places where people gather in large numbers. This action is a significant measure and can be very disruptive to people and their everyday lives.”

Are there enough supplies, equipment, hospital beds?

It’s not clear at this point whether Canada’s current stockpile of masks, gloves, respirators and other supplies and equipment is large enough to respond to a pandemic.

Tam said federal and provincial officials are now taking stock of the inventory, but the responsibility for setting aside adequate supplies lies with each province and territory.

The Public Health Agency of Canada (PHAC) co-ordinates the overarching plan for health emergencies. Tam said that as a result of the “changing landscape” due to COVID-19, officials at all levels are now “pulling together” information.

“Of course, we have to adapt to … the evolution of the outbreak in order to fine-tune some of these estimates … that’s the kind of exercise that’s being undertaken right now. But the granularity of the system’s preparedness is, of course, left to the provinces and territories,” she said.

Could Canada ban cross-border travel?

There are now at least 60 countries affected by the coronavirus, some with isolated cases and others with serious outbreaks.

Officials have said closing borders is ineffective in preventing the spread of the virus, so it’s unlikely that Canada would impose a total travel ban. But international travellers could be at heightened risk of being exposed to the virus, or being stranded by a quarantine situation, if they travel to a zone affected by the COVID-19.

Foreign Affairs Minister François-Philippe Champagne has encouraged Canadians to check Global Affairs Canada’s travel advisories before planning a trip. The advisories are updated as new information becomes available. 

Tam told Power & Politics that every Canadian should consider various factors as the busy March Break travel period approaches, such as their underlying health and age and their planned destination. She stressed the importance of being aware of any symptoms upon returning to Canada, and of self-isolation to avoid exposing others.

What should Canadians do to prepare?

There is no vaccine yet for the novel coronavirus. 

PHAC says Canadians should protect themselves against infection by washing their hands frequently with soap, staying home when sick, covering their mouths and noses when coughing or sneezing, and avoiding touching their eyes, nose, or mouths with unwashed hands.

“Although these sound like your basic things that you do every flu season, it is really important for you to rehearse, to talk to your kids and your family and keep practising these kind of measures,” Tam told P&P.

Tam and Health Minister Patty Hajdu also have suggested preparing as you would for a natural emergency such as a severe snowstorm — by setting aside a week’s supply of food, medicine and other household supplies. 

Tam also recommended having back-up plans for child care and work in the event someone in the household becomes sick. 

Infectious disease specialist Dr. Isaac Bogoch stressed the importance of getting reliable information about the coronavirus from authoritative sources, and said Canadians should take the opportunity to address chronic health care issues and fill outstanding prescriptions.

He told the CBC’s Front Burner podcast that Canadians are feeling daunted by the thought of being at the “precipice of a pandemic.” He offered what he called a uniquely Canadian message.

“You keep your head up and your stick on the ice,” he told host Jayme Poisson.

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Five reasons why Canada's 'shutdown' is a big deal – BBC News

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Canadian Prime Minister Justin Trudeau is under pressure from all sides.

At the forefront is a conflict first sparked over indigenous opposition to a natural gas pipeline project, that has now evolved to include broader complex issues like indigenous governance and indigenous rights.

It has led to rail blockades and protests that have crippled rail lines and disrupted the flow of the country’s economy.

Those events have underscored a pressure point for Mr Trudeau – he has struggled to deliver on his promise to chart a path for Canada that balances oil and gas development, environmental stewardship and indigenous reconciliation.

Here are five reasons why the current unrest is a big deal.

1 – It’s bad news for Justin Trudeau

The conflict has forced work to be paused on a major natural gas pipeline, the Coastal GasLink project, that Mr Trudeau’s Liberal government supports.

Until this week, his ministers had a hard time trying to set up a meeting with the Wet’suwet’en hereditary chiefs who led the calls for protests in support of their cause.

It is the latest resource project to hit gridlock amid opposition by some First Nations and environmental campaigners.

The prime minister’s political opponents have seized on the crisis to argue that he has shown weak leadership in his handling of the rail blockades and upholding of the rule of law.

They are also laying the blame for the country’s struggling oil and gas sector at his feet.

And Canadians are feeling frustrated – a poll published this week by the National Post newspaper suggested that almost 60% of Canadians don’t think the country is headed in the right direction, while 63% of respondents said Mr Trudeau was “not governing well”.

Who controls Canada’s indigenous lands?

Three areas – resource development, environmental stewardship and indigenous rights – have become more challenging for countries like Canada as climate change becomes a greater public concern and indigenous communities are increasingly empowered, says former interim Liberal leader Bob Rae.

Says Mr Rae: “Where governments and companies are prepared to embrace the need for dialogue and inclusion and recognition and so on, projects proceed and in fact benefit the First Nations quite significantly in terms of economic development”.

“Frankly nothing else works.”

2 – Businesses are hit by crippled rail troubles – and farms are getting cold

Rail blockades have meant that parts of the cross-country rail system have ground to a halt over the past weeks as the current conflict drags on.

Almost 1,500 rail workers are temporarily out of work and many industries are struggling with the impact, including agriculture.

Quebec dairy and grain farmer Martin Caron says farmers are under “real stress” amid shortages of soy and propane used for food and heating.

About 80% of the province’s propane and 65% of its soy is transported by rail, he says. Some is now being shipped by trucks at a significant mark-up.

Propane is used to heat buildings holding livestock, critical in Canadian winters.

“[There is] stress because we have animals and if we can no longer heat them properly, we put them at risk,” says Mr Caron. “So there’s an economic stress but also a mental health aspect to this – the animals are part of our families. The producers don’t want to put the animals at risk.”

While rail blockades have subsided this week and the Wet’suwet’en hereditary chiefs have sat down with government officials, it will take a number of weeks before the rail system is fully up and running.

“People are hoping with all their hearts that the federal government, among others, will position itself quickly to prevent crises like this,” says Mr Caron.

3 – Companies are spooked by the uncertainty

The University of Calgary’s Harrie Vredenburg, an expert on the global energy industry, says Canada has traditionally been a low risk political environment for investment. This helped it become the world’s fourth largest oil and gas exporter.

But the lack of certainty around the regulatory and approval process is now chilling business interest in the sector, he says.

A company can spend years getting environmental and First Nations approvals.

“In Canada you do all that and at the end it’s still a political decision that depends on what activists are doing and what the media is saying and it’s a totally unpredictable outcome,” says Mr Vredenburg.

This month, mining company Teck Resources pulled its application to build a major oil sands mine in northeastern Alberta.

The firm said the global capital markets, investors and customers are looking to places that reconcile “resource development and climate change”.

“This does not yet exist here today and, unfortunately, the growing debate around this issue has placed [the project] and our company squarely at the nexus of much broader issues that need to be resolved.”

The decision also came amid questions about the project’s financial viability.

“It had become a political football and I think in the end, the Teck board and management just said it isn’t worth it,” says Mr Vredenburg.

4 – It adds to the sense of ‘western alienation’

The economic recovery in the province of Alberta, after an overabundance of supply caused the worldwide price of oil to plummet a few years ago, has been slow.

The oil woes led to the loss of more than 100,000 jobs in Alberta and a full-on recession.

In October’s general election, the resource-rich provinces of Alberta and Saskatchewan turned solidly away from Mr Trudeau’s Liberal party amid a sense in western Canada that its interests were not represented.

Several pipeline projects – seen by the industry as critical for gaining access to global markets – hang in limbo, fuelling more frustration.

Some provincial premiers are also at loggerheads with Mr Trudeau over his main climate initiative, a carbon tax, which will be challenged in the country’s top court.

The Teck decision and the Wet’suwet’en conflict have only ramped up tensions.

Mr Vredenburg says “constant bickering” between provincial and federal leaders over energy and climate “doesn’t help Canada’s brand”.

5 – It highlights the challenges facing indigenous reconciliation and rights

Mr Trudeau came to power promising to transform the country’s relationship with indigenous people.

This conflict has highlighted the challenges involved in moving forward with that reconciliation.

Karen Joseph, CEO of the charity Reconciliation Canada, says the country is at the “very early stages of this process of reconciliation” with many systemic challenges that reinforce inequality still in place.

She says amid the unrest everybody needs “to stop and think about how we can do better, how we can show our children how we resolve conflict as leaders and as peoples so that they can move forward”.

Canada has a duty to consult with indigenous peoples before they begin any projects on their land.

But there is ambiguity around the rules for consultation – one of the roots of the civil unrest seen in recent weeks.

Coastal GasLink received the support of 20 First Nations along its route, including some Wet’suwet’en and their band council, though not a number of Wet’suwet’en hereditary chiefs.

Some First Nations have been vocal opponents of major resource projects.

Other indigenous communities have chosen to participate in the oil and gas sectors, seeing agreements with resource firms as an opportunity to close the gap in living standards that exists between indigenous peoples and the rest of Canada.

In a recent op-ed in the Globe and Mail newspaper, Abel Bosum, Grand Chief of the Grand Council of the Crees of Northern Quebec, shared how his community and the province were able to come to the table after a bitter conflict over large-scale resource development, and found a beneficial path forward.

Canada is not alone in facing many of these challenges that need a “significant shift” in how countries look at issues raised by the Wet’suwet’en conflict, says Ms Joseph.

“The difference in Canada is we have a opportunity and a number of policies that can facilitate a new way forward that’s potentially shareable globally.”

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