The latest Canadian real estate and government news. Risk of collapse, end of QE and rate rise are some of the issues discussed. Also the governments poor foreign policies on Ukraine are covered.
The Bank of Canada and other central banks, in conjunction with indigenous leaders want reconciliation and better economic outcomes for individuals. This video explores what is happening, gives the back story and sets the stage for a more in-depth analysis.
Inflation and tariffs hit Trudeau in the face. Oil route as new strain goes viral. BNPL benefits questioned and investors open their wallets to receive dividends.
The latest financial news from the financial services industry monitor. Insurance companies should know that in 1990 BC flooding devastated the same flood plains as today. This report features coverage of insane inflation, interest rates hikes and the ongoing real estate melt-up.
Poloz is wrong about inflation, university pension funds are out of their league, Home Capital run away, real estate wars and more from the financial services industry monitor.
We a living a ponzi real estate market and the economy is at risk. Yet Doug Porter, economist BMO, is on record as saying Candian\'s want to pay more for houses. Yes, you can\'t make this stuff up. This video discusses the issues related to Porter\'s statement and explains why he is wrong.
2020 was a record year, except for condos. Montreal REM sites the exception to this rule. This video shares insights regarding the Canadian real estate segment.
This video is intended to give viewers an understanding of the economic ideas behind Canada's potential housing bubble. This video also explains why Siddal, President and CEO of the CMHC, was likely pushed from his post.
Overview of Canadian banking industry. This multi-part series looks at issues facing Canadian banks from a variety of angles. Part 1 examines the types of banks and scale using ROE and EBITDA as measures.
Using financial data, Mark Sibthorpe compares the performance of TD bank to its rivals. TD grew faster in 2017 than its rivals, but was cited for aggressive sales practices.
This video covers XE.com's presentation at the AI, Big Data and Analytics event which took place in Toronto February 7/8, 2018. Cecelia Tamez and Jean Louis provide insights into their evolution and winning strategy.
Greenpeace's campaign to stop TD financing the oil sands is delusional. Trillions of dollars are at stake for the banks and the Canadian economy. This video explores the related financial issues.
Canadian banks have increased their deposits by $127 billion since the start of the pandemic. This video uses charts to show which banks gained the most and how.
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The big buzz in real estate recently is Mark Carney being scooped up by Brookfield. This means more juice for riskier borrowers. Brookfield, a huge player in real estate, both residential and commercial, recently bought its remaining shares from Sagen (Genworth MI Canada), which values the company at $3.8 bn.
VersaBank’s New High-Security VPN Proving Especially Valuable During COVID-19 Pandemic
VersaBank (TSX:VB) (“VB” or the “Bank”) today announced the implementation of its new high security Virtual Private Network (VPN) remote access software solution, developed in partnership with Tailscale, a leading provider of secure network connectivity solutions. The software enables VersaBank employees to securely and directly connect to all the Bank’s servers across multiple offices and cloud providers, using two factor authentication and with every connection encrypted. The Tailscale-based solution uses the Office 365 setup and Windows client/server applications that the Bank already had in place.
Considering Bernanke is hated by the Republicans and hated even more by the Democrats, and is currently under scrutiny for saving AIG but not Lehman, (in hindsight) with respect to issues over solvency vs liquidity, the Montreal lovefest attended by 1,100 people yesterday must have been a welcome respite. Click the link to read the entire 2014 report.
I have been reporting on Steve Eisman's short position for quite some time. As the analyst reaction to Eisman shows (link below), Eisman has taken a lot of heat for shorting Canadian banks. Instead of capitulating, in September 2019 he publicly disclosed the fact that he added Canadian Tire to his position, He explains the rationale for this in a BNN interview late 2019. Essentially, his big concern with respect to banks was non-performing loans in Alberta. He feels Canadian bank CEOs are not prepared for a credit cycle. He specifically referenced ATB (a private bank) in discussing his concerns. Looking at the numbers today, my guess is that he has made off like a bandit.
VersaBank Beta-Testing Its New, High Volume Mortgage Finance App
VersaBank announces it is initiating beta-testing on its newly developed high-volume mortgage software app with the Cortel Group, one of Canada’s largest home and condominium builders. The app, named “Direct Connect”, was designed to facilitate and significantly reduce the lengthy finance approval process typically experienced by home buyers when visiting home and condo pre-construction sales offices.
How and why you need to defend your brand against disruptors
Mark Sibthorpe
Technology, and being open to opportunities, has preempted transformation in banking. At the top of change are Mint, PayPal and ApplePay; three examples of transformative solutions that are now ubiquitous. On the horizon: Uber and Google, both having recently announced partner based banking services. Further down in the plumbing is Duca Impact Labs, Versabank, and Revolut. This report shows how cost conscious FIs can, not only stay relevant in the face of adversity, but punch well above their weight. All thanks to creative thinking and the ongoing commoditization of technology.
Canada has used consumer debt to provide life support to the economy. This strategy which basically pushed the day of reckoning to the next government was old back in 2014, and now is well past its sell-by-date. Recognizing this, and desperate to keep the economy out of a recession, Trudeau is spending more money now than any government in Canadian history. This report disusses a possible alternative.
ScoreCard Bill Morneau, Canada's Minister of Finance
This report is a scorecard I designed in order to rank the performance of the current Minister of Finance, Bill Morneau. I do regular rankings because, otherwise, I cannot measure the performance in a meaningful way. The scoring is based on a variety of metrics as detailed on the ‘score-table’ on page 3. Examples of the criteria and weighting include:
Observations and overview of 2018 NB flood support from government and insurance companies.
Flood aftermath is linked to post traumatic stress. Here are some findings from a study conducted by Queensland University following a flood:
"The findings showed that aftermath stress contributed to poor mental health outcomes over and above the flood itself, prior mental health issues and demographic factors," Ms Dixon said.
"Aftermath stress was the strongest predictor of post-traumatic stress symptoms with 75 per cent of people saying the most difficult aspect was the aftermath and dealing with insurance companies," she said.
With this in mind, I felt it was important to understand how New Brunswick flood victims were treated.
Argentina is in the news daily because the situation is dire, and may be an indication of further contagion. The most dramatic story that speaks of the a leading cause of its troubles was the recent arrest of the public works secretary, Jose Lopez. June 15th he was caught hiding millions in cash in a monastery. No this is not a plot for a comedy.
As states across the US legalize marijuana for both medicinal and recreational purposes, it has fueled a growing industry of marijuana related businesses (MRBs).
With Walmart Pay about to userp Apple Pay, I thought I would share my 2014 book on mobile payments and loyalty. The guilde was written for Merchants that want to understand loyalty, credit, mobile payments and Apple Pay, but anyone involved with credit and loyalty might find it useful.
The book is a prelude to Walmart leaving MCX, and chronicles the evolution that led to Walmart Pay. There is an extensive case study of Walmart that looks into its efforts to become an ILC and to avoid paying credit card transaction fees ('merchant discount').
It offers readers a step-by-step methodology for evaluating and transforming credit and loyalty programs. The strategies are based on proven examples and industry facts. The Nectar, Target, Canadian Tire and Walmart case studies are examples of the practical approach I have taken, written with the intent that merchants can use them as blueprints for their own initiatives.
TD’s share price recently collapsed by $7 bn in one day due to CBC’s allegations of aggressive selling tactics. A huge fall from a bank that was trading at a premium as recently as January. This was even before the most recent allegation of TD attempting to avoid paying taxes on advertising.
This report chronicles the events leading up to the collapse, shows TD's performance, analyses other related issues.
Footnote 151 implies an important regulatory change related to derivative contracts. It means that US Banks will not be required to hold as much capital against commodities. If you want to understand the implications of this regulatory change in more detail, see the enclosed related article detailing the changes. For contextual purposes, I have also included two Rolling Stones Magazines reports from 2010 and 2014 that chronicle the role large US banks have played in manipulating commodities. You might question the credibility of these sources, but rest assured, these reports are based on United States Senate hearings which outline the issues in a 396 page report related to the implied risks.
Consumer debt spending appears to have insulated Canada from the worst of the credit crisis, but now the alarming magnitude of consumer debt ($1.92-trillion) could exacerbate a day of reckoning.
This report assesses the issues at hand and recommends the solution to get Canada's economy on track.
Reasons financial service companies should consider gamification
According to Bloomberg, National Bank of Canada will take a C$64 million ($48 million) restructuring charge in the fourth quarter and said its investment in Maple Financial Group Inc., which is being probed by German regulators, may be at risk of a “substantial loss.”
Will Canadian banks charge companies for deposits?
In light of today’s possible rate cut, this report discusses how a bank rate cut and capital ratio pressure could precipitate negative corporate deposit interest rates in Canada.
Canadian Tire's (CTC) - Canadian Tire Financial Services (CTFS) Scotia deal overview and risk assess
Whether he knew it or not, Tom Reid, a senior vice-president at Sun Life, made a case for the behavior modification concept ‘Nudging’ when he recently proposed auto-enrolling Canadians in his company’s pension plans. Sun life cover 1.2 million Canadians, about 60% of the eligible employees.
This report looks at Canadian challenger banks (apart from merchant led banks) and explains why they have not threatened larger institutions. It also looks at ways in which these upstarts have achieved success.
Canadian banks have made money throughout the credit crisis, but this trend may be about to reverse. The rational supporting this prediction is that revenue has grown despite a declining net interest margin (NIM). It has grown in spite of this fact because Canadian debt (loan lease volume) has risen significantly, as shown in chart 2.
This report looks at the issues facing Canadian banks in the event of a Bank Rate rise.
Yesterday, the Attorney General of Switzerland (OAG) opened criminal proceedings related to the FIFA scandal. This report outlines some of the events related to the criminal investigation, with a particular focus on banking.
March 18, Finance Minister Jim Flaherty resigned from cabinet after having endured a difficult year due to health issues. This report looks at his legacy and attempts to grade his government’s performance to date.
Merchant led financial services are growing in importance once again. This is exemplified in the ongoing UK rivalry between ASDA, Sainsbury and Tesco. Together these merchant/financial service companies provide the backstop for three different approaches for merchants looking to extend their financial services.
Canadian and London real estate, like Macau, may also be a convenient means for China’s elite to move money offshore; with the deleterious effect of driving up home values. Louise Shelley`s research concurs. In a published paper written for the National Defense University, Shelley argues that money laundering in real estate (MLRE) increases prices.
Genworth had its Q4 2014 earnings call. Genworth own about 30% of the mortgage default insurance in Canada. Not surprisingly, the earnings call became focussed on Alberta; and for good reason, with 20% of its outstanding insured mortgage balance in Alberta, sensitivity to the oil shock and how Genworth plan to manage related risks were discussed in detail.
Based on historical financial data (see detailed charts pages 5-8), the oil based recession in Alberta, and comparison against two of its peers, this document outlines my observation with respect to CWB’s future performances.
Recently the CBC and The Globe and Mail both reported on what has been referred to as a consumer “bank fee outcry”. CBC compares banks to cable and phone companies, standing accused of trying to gouge customers with service fees. The backlash appears to have originated in conjunction with the NDP and the Consumers Council of Canada which argues that there is anxiety ‘among consumers about banking fees’.
Cheap oil has pushed the Bank of Canada's governor, Stephen Poloz onto a slippery slope. For some background on this, take October 22nd, when Poloz bid farewell to forward guidance, resulting in yesterday's surprise rate cut. A cut that has enraged TD and other banks, which see this as eroding profits.
This report explores Canada's strategies to compete globally. The report begins with an analyses of the housing market, because housing is the canary in the coal mine; explores what happens in the event of collapse; and analyses the underlying problem causing Canada to be uncompetitive.
Merchants that want to understand loyalty, credit and mobile payments should read this book. It offers readers a step-by-step methodology for evaluating and transforming credit and loyalty programs. The strategies are based on proven examples and facts. The Nectar, Target, Canadian Tire and Walmart case studies are examples of the practical approach I have taken, written with the intent that merchants can use them as blueprints for their own initiatives.
Mobile Payments Blueprint: guide to credit and loyalty transformation for merchants
Merchants that want to understand loyalty, credit and mobile payments should read this book. It offers readers a step-by-step methodology for evaluating and transforming credit and loyalty programs. The strategies are based on proven examples and facts. The Nectar, Target, Canadian Tire and Walmart case studies are examples of the practical approach I have taken, written with the intent that merchants can use them as blueprints for their own initiatives.
Special report explaining why some merchants in the UK, U.S. and Canada are expanding their financial services. The paper discusses the structural and regulatory pressures facing merchants and explains the rational behind key decisions. This is an 8 page high level report
With prices rising five times faster than the U.K. central bank’s two per cent target and the pound falling almost daily, policy makers led by Bank of England Governor Andrew Bailey are under pressure to step up the pace of monetary tightening.
The Bank of Canada is expected to cap its tumultuous year with another interest-rate increase this week, although private-sector forecasters are split on how big the bank will go as it appears to be approaching a turning point for monetary policy.
Central bankers must be feeling punch-drunk. For years, they strode like superheroes. We praised their genius, bestowed them with titles such as “maestro” – as one journalist labelled Alan Greenspan in a now-infamous encomium – and revelled in the New Jerusalem to which they’d delivered us: a Promised Land of low inflation and endless credit, where all we had to do to get rich was buy a house and watch it grow.
National Bank of Canada no longer allows customers to transfer their existing mortgages after purchasing new properties, meaning clients hoping to move to new homes can’t hold on to low interest rates locked in before the recent surge in borrowing costs.
Canadian Imperial Bank of Commerce could be forced to pay more than US$1-billion in damages after being found liable for losses incurred by a New York hedge fund over two debt deals dating back to the 2008 U.S. housing crisis.
Yahoo Finance - Olivia Raimonde and Sebastian Boyd (2022-12-05)
“While loans have performed well in an extremely challenging year, the path going forward is more problematic,” said Christian Hoffmann, a portfolio manager for Thornburg Investment Management. “As we get closer to short-term rates falling and defaults rising, the market could lose interest in the asset class.”
A further Bitcoin plunge of about 70% to $5,000 next year is among the “surprise” scenarios that markets may be “under-pricing,” the bank’s Global Head of Research Eric Robertsen wrote in a note on Sunday.
The bank’s adjusted earnings was $82 million or $0.88 per share in the three-month period ending Oct. 31, down 15 per cent from the same quarter last year. CWB joining most of the Big Six banks by raising its quarterly dividend, in its case by one cent to $0.32 per share.
The country’s six largest lenders set aside $19.4 billion (US$14.5 billion) for performance-based compensation in the fiscal year that ended Oct. 31. That marks a sharp slowdown from the 18 per cent increase in bonuses in fiscal 2021 and is far short of the five-year average of 8.2 per cent.
Those financial impacts "pose an emerging risk to the safety and soundness of financial institutions and the financial stability of the United States," the Fed said.
The US dollar has erased more than half of this year’s gains amid growing expectations the Federal Reserve will temper its aggressive rate hikes, and as optimism grows over China’s reopening plans.
Just as Amazon developed cloud technology for its own needs and then commercialised it, BlackRock built the Aladdin portfolio management system to manage its own holdings and started offering it to clients in 1999, Brooke Masters and I explore in this article.
During a prolonged bull market fuelled by historically low interest rates and nearly free money Doug Harmon and his team presided over record-breaking sales for many of Manhattan’s trophy office buildings. No longer.
Lenders and mortgage insurance providers are using emergency loan-modification options that will allow some struggling homeowners to extend their amortization periods, or reduce or defer payments, as mortgage payments soar along with interest rates.
"It's something we're watching closely and we're engaged with our European counterparts, as well as our American counterparts, to make sure that we're working together," Trudeau told a news conference Monday.
“Nevertheless, in November, the number of new listings is trending downward again, indicating that potential sellers are not rushing to sell their properties, or are not yet feeling compelled to do so,” Charles Brant, director of market analysis at QPAREB, said in the report.
Dave McKay, president and chief executive officer at RBC, said elevated uncertainty has been prompting investors to stay on the sidelines, affected asset values and dampening capital markets revenue. He added that while he sees silver linings like a strong jobs market and inflation that has appeared to have peaked, the bank is still cautious on the economic outlook largely because of high house prices and associated levels of consumer debt, high energy prices, and political and geopolitical tensions.
The Canadian housing bubble has popped, with prices down 14 per cent from the peak reached in the first quarter of the year. Looking at home affordability — the ratio of mortgage payments to income — we estimate it will take another 25 per cent drop in home prices for affordability to return to its historic average. That would chop roughly $1 trillion in home equity, enough to generate serious negative wealth effects.
Pension funds and other 'non-bank' financial firms have more than $80 trillion of hidden, off-balance sheet dollar debt in FX swaps, the Bank for International Settlements (BIS) said.
The Swiss competition commission has opened a preliminary investigation into whether dozens of banks were improperly sharing information about what they pay some staff, it said on Monday.
US home prices made lofty gains over the pandemic—a bigger run up than the one seen before the Great Recession. It’s going to be difficult to not see a significant chunk of those gains given back to the market, warned the Dallas Fed. Researchers from the US Federal Reserve branch warn severe recession is still possible. They need to tread carefully, since falling home prices can set off a negative feedback loop for the economy.
Canadian building permits continued to fall, making its second consecutive decline. Total permit values fell to $10.0 billion in October, down 1.4% from the previous month. In real terms, this worked out to a 0.9% decline, according to Stat Can. Permit values remain elevated compared to pre-2020, so this isn’t an alarming throttle. However, it’s worth noting that the drop in permit value is entirely due to housing.
Canada’s major banks wrapped up their fiscal year on an uneasy note, with a boost to profit margins from rising interest rates offset by inflated costs and gradual increases in loan losses as customers start to feel the strain from higher borrowing costs.
Toronto-Dominion Bank reported adjusted fourth-quarter profits that beat expectations and raised its dividend as higher margins earned on loans helped drive strong retail banking returns in Canada and the U.S.
Bank of Canada Governor Tiff Macklem is back in the hot seat after the central bank this week announced a $522-million third-quarter loss, the first such red ink in the institution’s nearly nine-decade history. More losses are expected in the coming months, creating an awkward situation for the federal government and raising inevitable questions about the bank’s independence.
Toronto-Dominion Bank, which has a large retail-banking presence in both Canada and the US, is making the most of rising interest rates. The bank reported Thursday that its net interest margin expanded to 1.81% in the three months through October, up 7 basis points from the previous quarter.
Yahoo Finance - Siegfrid Alegado and Anup Roy (2022-12-02)
The shift to green energy may be “inflationary and even slightly stagflationary,” Bank of France Governor Francois Villeroy de Galhau said Friday, speaking virtually on a panel at a central bank conference in Bangkok. “I stress might, we don’t know yet.”
Brett House, fellow at Public Policy Forum, talks with Financial Post’s Larysa Harapyn about what the latest GDP reading on Canada’s economy means to the Bank of Canada which will decide on interest rates on Dec. 7.
Florida's chief financial officer said on Thursday his department would pull $2 billion worth of its assets managed by BlackRock Inc (BLK.N), the biggest such divestment by a state opposed to the asset manager's environmental, social and corporate governance (ESG) policies.
The Bank of Canada has leeway to end its interest-rate hiking cycle in coming months even if the Federal Reserve keeps pushing borrowing costs higher next year, according to economists.
Canada’s real estate bubble has blown past the 90s bubble, and is going for the biggest of all time. National Bank (NBF) data shows affordability in Q3 2022 eroded to the worst level since the early 1980s. Just like the 80s bubble, they don’t expect this one to persist for much longer. Affordability is expected to improve next year as home prices continue to fall.
Rival banks are targeting HSBC Bank Canada’s talent and corporate clients as the country’s seventh-largest lender begins an anticipated year-long wait for approval of a takeover by Royal Bank of Canada
CM-T+0.93%increase
reported an 18-per-cent drop in fiscal fourth-quarter profit and raised its dividend as the bank was hit by higher expenses and loan loss provisions.
BMO-T+0.64%increase
posted a lower fourth-quarter profit on Thursday, as revenue from its capital markets business tumbled and the lender increased provisions for credit losses to brace for potential defaults in the face of a tepid economy.
The Ontario government has tapped Kevan Cowan to serve as chair of the province’s securities regulator after the unexpected departure of its last chair, Heather Zordel.
He’ll never want to admit it, but Royal Bank of Canada
RY-T+0.42%increase
chief executive Dave McKay can thank Prime Minister Justin Trudeau, at least in part, for landing Canada’s most coveted bank deal in decades.
Bank of Nova Scotia reported lower fourth-quarter profit as expenses increased and the bank set aside more money to cover loans that could default, but still beat low expectations on the strength of robust retail banking revenues.
"This also positions us as the bank of choice for commercial clients with international needs, newcomers to Canada and affluent clients who need global banking and wealth management capabilities," McKay said in a statement Tuesday.
TransUnion says more generation Z consumers entering the credit market likely helped drive the generation's participation up, while credit participation among consumers on the older end of the spectrum actually declined.
Borrowers with variable-rate mortgages have in many cases already been contacted by their lender to increase their mortgage payments. The Bank of Canada estimates that 50 per cent of variable mortgages — or a staggering 13 per cent of all mortgages in Canada — hit their trigger rates after they increased rates by fifty basis points in October. Variable rates have risen by 3.5 percentage points since March and are expected to rise another 25 to 50 basis points at the Bank’s December interest rate announcement. The central bank estimates payments for borrowers who took out variable-rate mortgages in 2021 had risen by 20 per cent on average by the end of October.
HSBC, in common with peers such as Lloyds Banking Group (LLOY.L) that has also closed branches in recent months, blamed changing customer behaviour for the move, saying customers are increasingly banking online.
The European Commission on Wednesday proposed confiscating Russian assets that have been frozen to punish Moscow for the invasion of Ukraine, exploring legal options with the EU's partners to compensate Kyiv for damage to the country.
Royal Bank of Canada’s planned acquisition of HSBC Holdings Plc’s Canadian unit would expand its lead in the country’s heavily concentrated financial market, strengthening its dealings with companies and wealthy individuals, while potentially drawing scrutiny from regulators.
Canada’s economy is gearing down rapidly after stronger-than-expected growth in the third quarter, potentially giving the central bank leeway to slow its interest rate increases.
The Federal Reserve will push rates higher than previously expected and keep them there for an extended period, Chair Jerome Powell said Wednesday, in remarks likely intended to underscore the Fed’s single-minded focus on combating stubborn inflation.
With financial markets roiling and house prices tumbling, investors in countries around the globe appear to have a diminished zeal for buying real estate outside of their own borders.
"Just the scale of moving into the product is probably something to call out," Neil McLaughlin, group head of personal and commercial banking at RBC, said on the call.
The dividend reinvestment incentive, expected to add about $2 billion in capital, comes amid higher chances of unlikely but disruptive events, said chief executive Dave McKay.
The lender is now shrinking wherever it sees itself as too bloated, and exiting where it is sub-scale compared to local players, spurred on by pressure from its biggest shareholder, Ping An Insurance Group of China.
Canadian auto loan delinquencies are climbing aggressively, hitting rarely seen levels. In Q3 2022, about 1.97% of auto loans had become delinquent. It was a big climb of 0.31 basis points (bps) from last year, an exceptionally high rate of delinquencies. Other than three quarters (Q4 2019 to Q2 2020), the rate hasn’t been this high in at least a decade.
Last April, when the Trudeau government tabled a budget amid some of the most difficult economic questions in decades, it said it was going to seek help finding answers.
Yahoo Finance - Kevin Simauchi and Hannah Miller (2022-11-29)
The petition, filed in New Jersey, lists BlockFi’s assets and liabilities at between $1 billion and $10 billion each. The company said in the statement that it had around $257 million of cash on hand, and is starting an “internal plan to considerably reduce expenses, including labor costs.”
The largest token rose as much as 2.1% and was trading at about $16,485 as of 10:23 a.m. in London. Second-ranked Ether also posted gains, while meme token Dogecoin surged 10% at one point.
The Financial Services Regulatory Authority of Ontario (FSRA) is proposing to eliminate deferred sales charges (DSC) — a potentially hefty commission levelled on customers who withdraw funds before the end of a contract — on new segregated fund contracts beginning June 1, 2023.
Schedule of earnings: Scotia Nov 29; RBC Nov 30, NB Nov 30; CIBC Dec 1, BMO Dec 1, TD Dec 1; Can Western Dec 2, Laurentian Dec 2 At least two analysts have revised their earnings expectations for the fourth quarter, pointing to volatile markets, the need to set more money aside for bad loans and and increasing funding costs among other headwinds.
Chinese entrepreneur Wang Min is delighted about Russia's embrace of the yuan. His LED lights company can price contracts to Russian customers in yuan rather than dollars or euros, and they can pay him in yuan. It's "win-win", he says.
“Margin expansion has been one of the more exciting developments in the banking space, partially offsetting recessionary concerns,” said National Bank analyst Gabriel Dechaine in a note.
The ECB has joined the U.S. Federal Reserve and other central banks around the world in rapidly raising rates to combat inflation that spiked as the global economy recovered from the Covid-19 pandemic, then got worse after Russia invaded Ukraine. Central banks risk tipping economies into recession as the world copes with an energy crisis, higher food costs and currencies weakening against the U.S. dollar.
The expansion is historic. From July to September, Canada’s population grew by around 285,000, a 0.7-per-cent gain that was the largest since Newfoundland joined Confederation in 1949. More than 700,000 people have been added over the past year, roughly the same as the population of Mississauga, the seventh-largest municipality in the country.
“We are aiming to become a $50 billion manager in the European marketplace over the next five years,” Drake-Brockman said. “There is an opportunity for managers in Europe like ourselves to grow into very substantial platforms, just like the Americans did a few years back.”
Japan is the world’s third biggest economy but living costs are high and wage increases have been slow. The conservative government has lagged on making society more inclusive for children, women and minorities.
Infrastructure investors are drawn to network assets like electricity grids and gas transmission systems because of their ability to generate steady, long-term returns. Ontario Teachers’ Pension Plan Board this month agreed to buy a 25% stake in SSE Plc’s electricity transmission grid business for about £1.5 billion.
Toronto-Dominion Bank said “irregular” activities involving “bad actors” led the bank and partner Canada Post to the pause a new service offering loans to remote communities. “While no TD customer information was compromised, we did elect to pause the program to investigate,” Amy Thompson, a spokesperson for the bank, said Saturday.
Top Canadian banks are expected to post a decline in fourth-quarter profits as choppy markets hurt wealth management and a slow deal pipeline dents income from investment banking, offsetting expected gains from business loans.
Bloomberg - Colum Murphy and Rebecca Choong Wilkins (2022-11-28)
The protests that erupted against China’s Covid Zero strategy represent one of the most significant challenges to Communist Party rule since the Tiananmen crisis more than 30 years ago. How Xi Jinping responds to it may end up being just as pivotal for the country’s future.
Canadian real estate prices are forecast to fall further, but pandemic-era gains won’t be wiped out—though it will be close. The firm sees prices falling 30% from peak-to-trough, after rising more than 54% since March 2020. For those without a calculator handy, that would leave March buyers with roughly 2.3% compound annual growth rate (CAGR). Not exactly the windfall many believed they were blessed with, especially when soaring inflation is considered.
G&M - HANNAH LANG, NIKET NISHANT AND MANYA SAINI (2022-11-28)
Cryptocurrency lender BlockFi has filed for Chapter 11 bankruptcy protection, it said on Monday, the latest crypto casualty following the spectacular collapse of the FTX exchange earlier this month.
The filing in a New Jersey court comes as crypto prices plummet. The price of bitcoin
BTZ22-0.34%decrease
, the largest digital currency by far, is down more than 70 per cent from a 2021 peak.
U.S. stocks ended sharply lower on Monday after protests in major Chinese cities against strict COVID-19 policies sparked concerns about economic growth, while Apple Inc slid on worries about a hit to iPhone production.
The TSX also fell, but only about half as much as major U.S. indexes, in a mixed day of trading across sectors.
When Deputy Prime Minister Chrystia Freeland called the chief executive officers of Canada’s Big Six banks on the Sunday in February before her government invoked the Emergencies Act, CEOs stressed that the tools they had to help choke off money pouring in to support the convoy protests were limited.
At that moment, banks needed court orders to freeze funds, the CEOs said, which are slow to be granted. To give banks the power to freeze funds faster, the government needed to sanction the protesters under the same anti-financial-crime laws it uses for terrorists, three CEOs said. They also urged the government to plug gaps in systems for monitoring transactions by bringing in a broader range of payments providers under stricter regulations.
Accounts of at least three calls Ms. Freeland held with bank CEOs over an eight-day span are contained in summaries called “readouts” and in Ms. Freeland’s handwritten notes from the meetings, which were revealed Thursday at the inquiry studying the use of the Emergencies Act. The readouts are general summaries prepared by Ms. Freeland’s staff, and not full transcripts or exact descriptions of what was said.
What the CEOs were not told on the first call on Feb. 13 was that the government was getting ready to use the Emergencies Act to expand the banks’ powers to freeze accounts. In a briefing note sent to Ms. Freeland before the call, her director of economic strategy and planning, Tyler Meredith, wrote: “We have not given them any indication about what is under consideration. ... So your comments may be the first signal of forward guidance.”
Near the end of that call, Ms. Freeland told bank CEOs the government was considering options “which in normal times would be seen as draconian,” according to a readout. Deputy finance minister Michael Sabia told them, “we will not take you by surprise,” promising to keep the CEOs updated on any actions to ensure they were “comfortable and that it is implementable.”
But the banks received only cursory notice before the government announced it would use the Emergencies Act the next day, on Feb. 14. And for days after that, the banks were left scrambling to understand how to execute the government’s orders.
The CEO-level calls came after a flurry of close collaboration between banks and the Finance Ministry in response to the COVID-19 pandemic. But relations between the major banks and Ottawa have ranged from distant to strained in recent years.
Ms. Freeland’s initial outreach was an attempt to involve banks in bringing the convoy protests to an end, and to get bankers’ help in assessing the gravity of the damage to Canada’s economy. Subsequent calls focused on working out the complex mechanics of halting the flow of money to the protesters.
The banks were not necessarily opposed to freezing accounts. Toronto-Dominion Bank CEO Bharat Masrani said on Feb. 13 that if the government designated the protesters as terrorists under the law, “we could act swiftly,” according to a readout of the call – a sentiment echoed by Royal Bank of Canada CEO Dave McKay and Bank of Montreal’s Darryl White. In that scenario, Mr. Masrani also urged government to give banks a list of “mischief makers” to pursue, according to Ms. Freeland’s notes.
On Feb. 13, one CEO after another drove home the grave impact the protests were having on Canada’s reputation and its economy. TD’s Mr. Masrani emphasized that “Canada’s reputation is at risk,” and was echoed minutes later by Canadian Imperial Bank of Commerce CEO Victor Dodig, according to a readout and Ms. Freeland’s own notes.
BMO’s Mr. White is said to have called the blockades “a national crisis,” urging Ms. Freeland “to act immediately” and citing a U.S. investor who told him, “I won’t invest another red cent in your banana republic in Canada,” a readout said.
But at that point, the bank CEOs thought they would be acting under existing laws when they spoke about of labelling protesters as terrorists, not using extraordinary powers to freeze accounts.
Spokespeople for each of the Big Six banks declined to comment on Friday.
At the federal inquiry on Thursday, Ms. Freeland testified that the CEOs’ comments helped crystallize her understanding that the protests were “profoundly jeopardizing” Canada’s economy.
had privately encouraged the government to bring non-bank payments providers “more clearly” under existing anti-money-laundering laws, Mr. Meredith wrote in his briefing note to Ms. Freeland.
Just over a fifth (21.2%) of insured mortgages outstanding were variable rate in September. That’s up significantly from 16.0% last year, and the 13.3% low for the period back in January 2021. Not as bad as the share seen with uninsured mortgages, but the share still climbed more than half.
In a new report, the Basel Committee said that the non-bank financial intermediary sector, also known as the shadow banking sector, represents a concern for global financial stability based on its size, its continued expansion, and its growing connections to the traditional financial sector and the real economy.
At the same time, it will also collect an additional $13.5 million in participation fees from firms (primarily the large banks) that are active in OTC derivative markets to help finance enhanced oversight of that market.
Like stock certificates sprinkled with pixie dust, inflated exchange tokens were at the core of FTX’s spectacular collapse. They are still in widespread use at major cryptocurrency exchanges around the world. Will they be crypto’s undoing?
After a decade of false starts, a federal bill to give pension plan members the highest priority when plan funding falls short in a company bankruptcy has unanimously passed a vote in the House of Commons, pushing a long-debated protection for pensioners closer to becoming law.
Parliamentarians questioned Bank of Canada Governor Tiff Macklem about inflation and historic financial losses at the central bank on Wednesday, with top opposition politicians looking to frame the bank’s continuing dilemmas to their political advantage.
Venture capital investment in Canada has collapsed to its lowest quarterly level since the early days of the pandemic as economic conditions continue to deteriorate and companies seeking investment struggle to find a meeting point on prices with financiers.
The increase brings the key rate to 2.5% in the European Union country, which does not use the euro currency so it is not part of the European Central Bank’s decision-making.
Yahoo Finance - STEVE AMBLER AND JEREMY KRONICK (2022-11-24)
The Bank of Canada’s ballooning balance sheet has received lots of attention lately. From $120 billion in early March 2020 it grew over the next 12 months to $575 billion and it still stands at $414 billion today, more than three times what it was. That happened because in response to the pandemic the Bank purchased Government of Canada bonds from commercial banks. It added the bonds to the asset side of its balance sheet and paid for them by boosting “settlement balances” — basically, the commercial banks’ bank accounts with it — on the liability side. Voilà, a ballooned balance sheet.
Banks aren't matching Fed rate rises because in effect they don't have to. "Deposits have increased significantly as a source of funding for the banking sector," New York Fed analysts Alena Kang-Landsberg and Matthew Plosser wrote in a research paper released by the regional bank this week. "One reason banks may be reluctant to raise deposit rates is that they have more deposits than they really need, so they are willing to allow depositors to seek better rates elsewhere."
Bloomberg - Sidhartha Shukla and Anna Irrera (2022-11-24)
Crypto billionaire Changpeng “CZ” Zhao further outlined his plans to backstop the stricken industry, pledging to amass at least $1 billion for buying distressed assets and saying his Binance Holdings Ltd. will make another bid for bankrupt lender Voyager Digital.
Fidelity National Information Services Inc. plans to dismiss thousands of workers as part of incoming Chief Executive Officer Stephanie Ferris’s strategy to win back investor confidence after the fintech giant slumped 44% this year.
Ontario real estate markets went from leading on the way up to the way down. In dollar terms, a typical Kitchener-Waterloo buyer was $146,500 underwater in October. By far it was the worst, with Cambridge (-$140,000), and London-St. Thomas (-$137,000) following not far behind. Six-figure exits from a home in a small city at least an hour from Toronto sounds painful, to put it lightly.
The presentation material referenced during the call will be available on the Bank’s website (www.versabank.com), SEDAR (www.sedar.com) and EDGAR (https://www.sec.gov/edgar). The audio conference line will be available at: 416-764-8659 or 1-888-664-6392 (toll free).
Bay Street bankers who were bracing for major cuts to year-end bonuses can expect some delay to their disappointment, but the respite will likely be brief.
Office property owner Allied Properties REIT is considering the sale of its data-centre portfolio, a deal that would help the commercial landlord pay down debt as it retools for a new era of higher interest rates and hybrid working.
CBC - Philippe de Montigny, Pete Evans (2022-11-24)
"Since the launch, the product was paused both online and in physical locations, after experiencing processing issues," the bank said, without elaborating. "We're still working through this and will update accordingly."
But the Canada Revenue Agency isn’t waiting around for this new legislation to come into force. It’s currently challenging perceived real estate “flips” through the court system, with mixed results, depending on the facts of the case.
Postal Savings Bank of China has agreed to provide a total of 280 billion yuan ($39.17 billion) in financing to property companies including Vanke, Longfor and Country Garden, it said in a statement on Thursday.
JPMorgan Chase & Co. and Deutsche Bank AG were accused of enabling the sexual abuse of Jeffrey Epstein in New York class action suits that allege the banks turned a blind eye in order to “churn profits.”
“While we are not perfect in any area, if you objectively look at what Amazon is doing on these important matters you’ll see that we do take our role and our impact very seriously,” Amazon spokesman David Nieberg said.
The main lobbying group for Canada’s banking industry invoked the collapse of FTX and Celsius Network in warning that the government needs to establish better consumer protections for the country’s payments systems.
Manulife Financial Corp. is eliminating about 50 jobs in the US and Canada as part of a plan to outsource some real estate operations and focus more on investing.
Canada’s financial system should be able to weather a period of heightened stress, but many recent home buyers could experience a “painful” squeeze as interest rates continue to rise, the Bank of Canada’s second-in-command said Tuesday.
Most variable-rate mortgages in Canada have static monthly payments, meaning the payment will remain the same even as interest rates change. Trigger rates are activated when the interest portion exceeds the payment itself, and it's a trend that has become more widespread amid the sharp jump in interest rates this year.
Iceland’s continued aggression coincides with an earlier decision on Wednesday by New Zealand’s central bank to raise by a record 75 basis points, and Sweden’s Riksbank is expected to unveil a 75 basis-point hike on Thursday. By contrast, some global counterparts may dial down their tightening. Just this week, two Federal Reserve officials reinforced expectations that US rate hiking will start slowing.
The advocacy group gave Toronto-Dominion Bank a grade of B- for financed emissions reduction targets, the highest among the big banks in that or any other category. Bank of Montreal, meanwhile, scored highest of the group for its transition plan to reduce high-carbon financing, especially of fossil fuels, with a grade of C+.
Bloomberg - Ari Altstedter, Kevin Orland, and Lizzie Kane (2022-11-23)
For the past 25 years, Canada has been in the grip of the world’s biggest housing boom, a near unbroken run of price appreciation unparalleled among its developed peers.
“Over the course of less than two years house prices went up by more than 50% in most markets. And housing activity—the number of houses being bought and sold—was about 30% higher than pre-pandemic levels,” she emphasized.
“The key for investors is not so much what the Fed does on a given day, [but] rather the read on the expected longer-term trajectory for financial conditions, inflation and the health of the economy,” said Myles Zyblock, chief investment strategist with Toronto-based Dynamic Funds, in an Oct. 31 market commentary. “At this stage, inflation has remained stubbornly high, leaving the Fed with little wiggle room to take their foot off the brakes.”
Mutual fund assets under management (AUM) have been in steady retreat after soaring above $2 trillion in the fourth quarter of 2021 on the strength of robust global markets. According to data from the Investment Funds Institute of Canada (IFIC), at the end of Q3 2022, mutual fund AUM was about $1.75 trillion — almost exactly where it was at the start of 2021.
RBC has now partnered Swift, as well as JP Morgan, to help Canadian businesses send cross-border payments of up to $10,000 in foreign currencies with "speed, security, predictability and efficiency".
One of our key themes this year has been that earnings estimates were wildly optimistic. Analysts are now beginning to come around to this view, with 2023 S&P 500 earnings per share (EPS) being trimmed to US$237 from a peak of US$249. However, if a recession hits next year — our base case — there is still a lot further to go in terms of the stock market discounting a realistic earnings profile. One of our key themes this year has been that earnings estimates were wildly optimistic. Analysts are now beginning to come around to this view, with 2023 S&P 500 earnings per share (EPS) being trimmed to US$237 from a peak of US$249. However, if a recession hits next year — our base case — there is still a lot further to go in terms of the stock market discounting a realistic earnings profile.
Chinese authorities are poised to impose a fine of more than $1 billion on Jack Ma's Ant Group, said six sources with direct knowledge of the matter, setting the stage for ending the fintech company's two-year long regulatory overhaul.
Russia’s international ambitions for its homegrown alternative to Visa and Mastercard have been dashed as even some of its closest allies have dropped its Mir payment system following a threat by the US to sanction anyone who helps or supports its use.
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With prices rising five times faster than the U.K. central bank’s two per cent target and the pound falling almost daily, policy makers led by Bank of England Governor Andrew Bailey are under pressure to step up the pace of monetary tightening.
The Bank of Canada is expected to cap its tumultuous year with another interest-rate increase this week, although private-sector forecasters are split on how big the bank will go as it appears to be approaching a turning point for monetary policy.
Central bankers must be feeling punch-drunk. For years, they strode like superheroes. We praised their genius, bestowed them with titles such as “maestro” – as one journalist labelled Alan Greenspan in a now-infamous encomium – and revelled in the New Jerusalem to which they’d delivered us: a Promised Land of low inflation and endless credit, where all we had to do to get rich was buy a house and watch it grow.
National Bank of Canada no longer allows customers to transfer their existing mortgages after purchasing new properties, meaning clients hoping to move to new homes can’t hold on to low interest rates locked in before the recent surge in borrowing costs.
Central bankers must be feeling punch-drunk. For years, they strode like superheroes. We praised their genius, bestowed them with titles such as “maestro” – as one journalist labelled Alan Greenspan in a now-infamous encomium – and revelled in the New Jerusalem to which they’d delivered us: a Promised Land of low inflation and endless credit, where all we had to do to get rich was buy a house and watch it grow.
National Bank of Canada no longer allows customers to transfer their existing mortgages after purchasing new properties, meaning clients hoping to move to new homes can’t hold on to low interest rates locked in before the recent surge in borrowing costs.
During a prolonged bull market fuelled by historically low interest rates and nearly free money Doug Harmon and his team presided over record-breaking sales for many of Manhattan’s trophy office buildings. No longer.
"It's something we're watching closely and we're engaged with our European counterparts, as well as our American counterparts, to make sure that we're working together," Trudeau told a news conference Monday.
“Nevertheless, in November, the number of new listings is trending downward again, indicating that potential sellers are not rushing to sell their properties, or are not yet feeling compelled to do so,” Charles Brant, director of market analysis at QPAREB, said in the report.
The Canadian housing bubble has popped, with prices down 14 per cent from the peak reached in the first quarter of the year. Looking at home affordability — the ratio of mortgage payments to income — we estimate it will take another 25 per cent drop in home prices for affordability to return to its historic average. That would chop roughly $1 trillion in home equity, enough to generate serious negative wealth effects.
US home prices made lofty gains over the pandemic—a bigger run up than the one seen before the Great Recession. It’s going to be difficult to not see a significant chunk of those gains given back to the market, warned the Dallas Fed. Researchers from the US Federal Reserve branch warn severe recession is still possible. They need to tread carefully, since falling home prices can set off a negative feedback loop for the economy.
Canadian building permits continued to fall, making its second consecutive decline. Total permit values fell to $10.0 billion in October, down 1.4% from the previous month. In real terms, this worked out to a 0.9% decline, according to Stat Can. Permit values remain elevated compared to pre-2020, so this isn’t an alarming throttle. However, it’s worth noting that the drop in permit value is entirely due to housing.
Bank of Canada Governor Tiff Macklem is back in the hot seat after the central bank this week announced a $522-million third-quarter loss, the first such red ink in the institution’s nearly nine-decade history. More losses are expected in the coming months, creating an awkward situation for the federal government and raising inevitable questions about the bank’s independence.
Yahoo Finance - Siegfrid Alegado and Anup Roy (2022-12-02)
The shift to green energy may be “inflationary and even slightly stagflationary,” Bank of France Governor Francois Villeroy de Galhau said Friday, speaking virtually on a panel at a central bank conference in Bangkok. “I stress might, we don’t know yet.”
Brett House, fellow at Public Policy Forum, talks with Financial Post’s Larysa Harapyn about what the latest GDP reading on Canada’s economy means to the Bank of Canada which will decide on interest rates on Dec. 7.
The Bank of Canada has leeway to end its interest-rate hiking cycle in coming months even if the Federal Reserve keeps pushing borrowing costs higher next year, according to economists.
Canada’s real estate bubble has blown past the 90s bubble, and is going for the biggest of all time. National Bank (NBF) data shows affordability in Q3 2022 eroded to the worst level since the early 1980s. Just like the 80s bubble, they don’t expect this one to persist for much longer. Affordability is expected to improve next year as home prices continue to fall.
Borrowers with variable-rate mortgages have in many cases already been contacted by their lender to increase their mortgage payments. The Bank of Canada estimates that 50 per cent of variable mortgages — or a staggering 13 per cent of all mortgages in Canada — hit their trigger rates after they increased rates by fifty basis points in October. Variable rates have risen by 3.5 percentage points since March and are expected to rise another 25 to 50 basis points at the Bank’s December interest rate announcement. The central bank estimates payments for borrowers who took out variable-rate mortgages in 2021 had risen by 20 per cent on average by the end of October.
Canada’s economy is gearing down rapidly after stronger-than-expected growth in the third quarter, potentially giving the central bank leeway to slow its interest rate increases.
The Federal Reserve will push rates higher than previously expected and keep them there for an extended period, Chair Jerome Powell said Wednesday, in remarks likely intended to underscore the Fed’s single-minded focus on combating stubborn inflation.
With financial markets roiling and house prices tumbling, investors in countries around the globe appear to have a diminished zeal for buying real estate outside of their own borders.
Last April, when the Trudeau government tabled a budget amid some of the most difficult economic questions in decades, it said it was going to seek help finding answers.
Canadian real estate prices are forecast to fall further, but pandemic-era gains won’t be wiped out—though it will be close. The firm sees prices falling 30% from peak-to-trough, after rising more than 54% since March 2020. For those without a calculator handy, that would leave March buyers with roughly 2.3% compound annual growth rate (CAGR). Not exactly the windfall many believed they were blessed with, especially when soaring inflation is considered.
Just over a fifth (21.2%) of insured mortgages outstanding were variable rate in September. That’s up significantly from 16.0% last year, and the 13.3% low for the period back in January 2021. Not as bad as the share seen with uninsured mortgages, but the share still climbed more than half.
Parliamentarians questioned Bank of Canada Governor Tiff Macklem about inflation and historic financial losses at the central bank on Wednesday, with top opposition politicians looking to frame the bank’s continuing dilemmas to their political advantage.
Yahoo Finance - STEVE AMBLER AND JEREMY KRONICK (2022-11-24)
The Bank of Canada’s ballooning balance sheet has received lots of attention lately. From $120 billion in early March 2020 it grew over the next 12 months to $575 billion and it still stands at $414 billion today, more than three times what it was. That happened because in response to the pandemic the Bank purchased Government of Canada bonds from commercial banks. It added the bonds to the asset side of its balance sheet and paid for them by boosting “settlement balances” — basically, the commercial banks’ bank accounts with it — on the liability side. Voilà, a ballooned balance sheet.
Ontario real estate markets went from leading on the way up to the way down. In dollar terms, a typical Kitchener-Waterloo buyer was $146,500 underwater in October. By far it was the worst, with Cambridge (-$140,000), and London-St. Thomas (-$137,000) following not far behind. Six-figure exits from a home in a small city at least an hour from Toronto sounds painful, to put it lightly.
Canada’s financial system should be able to weather a period of heightened stress, but many recent home buyers could experience a “painful” squeeze as interest rates continue to rise, the Bank of Canada’s second-in-command said Tuesday.
Bloomberg - Ari Altstedter, Kevin Orland, and Lizzie Kane (2022-11-23)
For the past 25 years, Canada has been in the grip of the world’s biggest housing boom, a near unbroken run of price appreciation unparalleled among its developed peers.
“Over the course of less than two years house prices went up by more than 50% in most markets. And housing activity—the number of houses being bought and sold—was about 30% higher than pre-pandemic levels,” she emphasized.
As the Bank of Canada squeezes the economy with higher interest rates, central-bank economists are betting that unemployment won’t spike as much as in previous downturns because of the elevated level of job vacancies across the country.
Yahoo Finance - Chikako Mogi and Takako Taniguchi (2022-11-18)
A 50 basis-point hike in December accompanied by hawkish rhetoric may end up pushing the yen past its three-decade low of 151.95 against the dollar. After that, the Japanese currency is more likely to strengthen, based on his views for the Fed, Thomas said.
This is less than the roughly 500 billion euros many analysts expected for the first voluntary repayment window of the ECB's Targeted Longer Term Refinancing Operation (TLTRO) since terms were changed last month.
What do Bill Hwang, the disgraced US investor, and Liz Truss, Britain’s shortest-serving prime minister, have in common? They were behind two of the multiple mini-crises in recent years that have gotten investors, bankers and regulators sweating about systemic risks for financial markets and investment funds. What people aren’t talking about enough, however, is the knock-on effect for banks.
The European Central Bank needs to keep raising interest rates but must not move too fast to avoid unnecessarily exacerbating a downturn, two policy-makers said on Monday, with one of them making the case for slowing the pace of policy tightening soon.
CBC - Peter Zimonjic, Catherine Cullen (2022-11-15)
"Rather than developing a tailored response intended to slow profits, stop profiteering, fix supply chain bottlenecks and help workers keep up, policy makers have taken to blaming workers instead — including the governor of the Bank of Canada, who has basically declared class war on working people in this country," said Unifor president Lana Payne.
Time and again, Europe’s leaders have pledged to address a looming threat to their union: excessive government debt. Yet time and again, events — first the pandemic, now a war-related energy shock — have undermined their plans, making the problem larger.
Some months after Jerome Powell became Federal Reserve Chair in early 2018, the former attorney and longtime investment banker began carrying around a new memoir by Paul Volcker: Keeping At It: The Quest for Sound Money and Good Government. “I actually thought I should buy 500 copies of his book and just hand them out at the Fed," Powell quipped at a conference in October 2019, just two months before Volcker passed away at 92. "I didn’t do that, but it’s a book I strongly recommend, and we can all hope to live up to some part of who he is."
It was a gracious, but arguably consequence-free tribute by Powell. After all, inflation was then running at just 2% and the towering (6’7”), cigar-puffing Volcker was most famous for taming the stubbornly high inflation that plagued the United States in the 1970s and early 1980s—and driving the economy into a painful double-dip recession while doing it. No need to emulate that.
But now Powell is facing the sharpest inflation spike in 40 years and some critics worry he may be hewing too closely to an outdated Volcker playbook, tightening too-fast and too long and spurring a deeper-than-needed recession at home and abroad. Repeatedly this year, Powell has alluded to the title of Volcker's memoir when discussing the duration of interest rate hikes, pledging the Fed must "keep at it" until inflation slows. He has insisted the stop-and-start Fed policy, led by Volcker predecessor Arthur Burns in the 1970s, was a mistake because it bred stagflation—that is, prolonged inflation in addition to stagnant growth—making it even more difficult to tame skyrocketing prices.
On Wednesday, Fed officials hiked interest rates by 75 basis points for a fourth-straight time in six months, pushing the key federal-funds rate (that’s the rate at which banks lend to each other, not to consumers or businesses) to a target range of 3.75% to 4%—the highest level since the Great Recession.
In their formal announcement, officials hinted they may slow the pace of hikes in December, saying they will take into account "the lags with which monetary policy affects economic activity" in determining future increases. But Powell, in the press conference that followed, didn’t back away from his hawkish stance, saying the latest economic data suggests the Fed may ultimately move rates to higher levels than it projected in September and that the risk is doing too little rate-hiking, not too much.
"We want to get this exactly right, but if we over-tighten, then we have the ability with our tools to support economic activity strongly," Powell said. "On the other hand, if you make a mistake in the other direction, and you let this [inflation] drag on a year or two, the risk is that it becomes entrenched in people's thinking." That’s what happened in the 1970s and early 1980s, as expectations of high inflation became entrenched and workers (many more of them unionized back then) demanded higher raises to cover future inflation.
For years now, central banks around the world have helped consumers and businesses weather economic storms. In crisis after crisis, they cut interest rates to help people get through. They printed money and bought bonds to prop up markets.
The Bank of Canada (BoC) surprised many with its rate hike earlier this month. Despite the market pricing in 75 basis points (bps), the central bank went with a 50 bps move. At 3.75%, the policy rate is now the highest in over a decade, and many assumed a smaller hike indicated we were close to peak. Not exactly.
John Vickers, a former chief economist who joined the central bank in 1998, will say in his Beesley lecture in London on Wednesday night that the central bank has fallen short and must be bolder to bring inflation back to the 2% target.
The federal government is on track to blow the spending target it set in April by $20 billion. That’s astonishing when we’re just a little more than halfway through the budget year. But here’s the most amazing part: Finance Minister Chrystia Freeland called her fiscal update “prudent.”
The idea that releasing greenhouse gases into the atmosphere should cost money — known as carbon pricing — sits at the center of the federal Liberals’ plan to limit climate change, and now they’re working on policies to ensure that it remains in place in Canada for years to come. Last month, Jonathan Wilkinson, minister of natural resources, told a crowd in downtown Toronto, that the federal Liberals plan to introduce a policy to ensure carbon pricing not only remains in place through at least 2030, but also ramps up during that time, from $50 per tonne to $170 per tonne.
In 1978, Chinese leader Deng Xiaoping announced that his country would make a break with the past. After decades of political purges, economic autarky, and suffocating social control under Mao Zedong, Deng began stabilizing Chinese politics, removing bans on private enterprise and foreign investment and giving individuals greater freedom in their daily lives. This switch, termed “reform and opening,” led to pragmatic policies that improved Beijing’s relations with the West and lifted hundreds of millions of Chinese people from poverty. Although China remained authoritarian, Deng shared power with other senior party leaders—unlike Mao. And when Deng left office, his successors continued down much the same path.
A newly announced Saskatchewan first act and the proposed Alberta sovereignty act aim to profoundly reshape this country by finally taking a stand against the federal government’s propensity to control areas of provincial jurisdiction. On Nov. 1, Saskatchewan Premier Scott Moe tabled Bill 88, which will assert provincial control over energy development, exploration and the production of electricity within the province. The legislation also seeks to unilaterally amend the Saskatchewan Act and the Canadian Constitution, to say that natural resource development is “critical to the future well-being and prosperity of Saskatchewan and its people.”
The central bank boosted its key rate by three-quarters of a percentage point, to three per cent, after consumer price inflation returned to a 40-year high in September. The aggressive move comes even as the bank predicted a two-year economic contraction through June 2024, which would be the longest recession since at least 1955, according to the Office for National Statistics.
Yahoo Finance - Randy Thanthong-Knight and Geoffrey Morgan (2022-11-04)
The buyback tax will be imposed on the net value of all types of share repurchases by public corporations in Canada. It is double the size of the 1% excise tax on repurchases that was signed into law by US President Joe Biden as part of the Inflation Reduction Act unveiled in August.
Back then, Powell intimated that an inversion would signal the need for the Fed to begin thinking of easing policy. The spread between three-month rates and the 18-month forward expectation of the three-month rate touched two basis points in recent days, and is well off the nearby highs of 130 basis points, and the best the chair could say was “it’s not inverted.”
The Bank of Canada is approaching the end of its rate hike campaign, but Canadians should expect borrowing costs to rise further before the pause, the central bank’s governor, Tiff Macklem, said Tuesday evening.Inflation remains far too high, Mr. Macklem told the Senate committee on banking, commerce and the economy. At the same time, the Canadian economy is expected to “stall” in the coming quarters, he said. This puts the central bank in a precarious spot.“If we don’t do enough, Canadians will continue to endure the hardship of high inflation. And they will come to expect persistently high inflation, which will require much higher interest rates and, potentially, a severe recession to control inflation,” Mr. Macklem told the Senate committee. He was there to explain the bank’s latest interest rate hike, announced last week.“If we do too much, we could slow the economy more than needed. And we know that has harmful consequences for people’s ability to service their debts, for their jobs and for their businesses.”The central bank raised its benchmark interest rate by another 50 basis points last Wednesday. (There are 100 basis points in a percentage point.) The move was smaller than financial markets had expected, but still brought the policy rate to 3.75 per cent – the highest level since early 2008.Mr. Macklem and his team have now raised rates six times since March, one of the fastest rate-hike cycles in decades. The crucial question is how much further the bank intends to go. Financial markets expect the bank to announce additional 25-basis-point increases in December and January, bringing the policy rate to a resting place of 4.25 per cent.Mr. Macklem shrugged off a question from Senator Pierrette Ringuette about an end point for interest rate hikes.“It’s pretty clear we think it needs to go up, but we do think we’re getting closer to the end,” he said. “That gives you a broad indication there. Yes, there’s a bit of space within that. As we get closer, as we get more information, we’ll make those decisions in real time.”The Bank of Canada isn’t alone in increasing borrowing costs. Central banks around the world are rapidly raising interest rates, in one of the most comprehensive global monetary policy tightening episodes on record. The U.S. Federal Reserve, the world’s largest and most important central bank, is expected to announce another 75-basis-point rate hike on Wednesday.Higher interest rates make it more expensive to borrow money. The goal of the increases is to reduce how much consumers want to buy, and how many workers businesses want to hire, which would in turn slow the pace of price and wage growth. In other words, the Bank of Canada is intentionally slowing down the economy in an effort to restore price stability.Rate hikes are already squeezing the Canadian housing market, with house prices down around 10 per cent from the peak earlier this year. Spending on other big-ticket items, such as furniture and appliances, is also trailing off. The outlook for the broader economy has darkened.The bank’s latest economic forecasts, published last week, show near-zero economic growth in the next three quarters. It now thinks there is a roughly 50-50 chance that Canada will experience several quarters of negative growth – a common definition of a recession. That will mean a rise in unemployment.“We are aware that this will tend to affect the most vulnerable workers the most. It will be a difficult transition for some. But there’s not really an alternative,” Mr. Macklem said. “We need a period of low growth … We’ve got to get the labour market into better balance.”The inflation picture is mixed. The rate of annual consumer price index inflation has trended down in recent months, thanks largely to falling gasoline prices. CPI inflation was 6.9 per cent in September, compared to a four-decade high of 8.1 per cent in June. The bank’s target is 2 per cent.At the same time, a growing number of goods and services are experiencing oversized price increases, making inflation harder to avoid. Two-thirds of the components of the consumer price index experienced annual price jumps of more than 5 per cent in September. Canadians are being hit particularly hard at the grocery store, where food prices rose 11.4 per cent year-over-year in September – the biggest jump since 1981.
That's the bank's way of saying that after having raised its rate five times in barely six months, it is getting closer to leaving the policy rate where it is while it assesses the impact of its increases so far.
“I think (rising debt costs and recession risks) go hand-in-hand really, to be honest,” Bartlett said. “It’s really just a function of an economic downturn — revenue growth slows, expense growth rises as a result of that. Then you layer on the gradual effects of higher inflation feeding into higher spending, plus higher interest rates which are leading to the economic downturn. So, it’s a bit of a perfect storm for a weaker fiscal forecast.”
The Bank of Canada is approaching the end of its rate hike campaign, but Canadians should expect borrowing costs to rise further before the pause, the central bank’s governor, Tiff Macklem, said Tuesday evening.
Normally the Federal Reserve makes a profit from its balance sheet, but with higher interest rates it is now in the red. WSJ explains how the Federal Reserve makes money, what it does with it, and what happens now.
That level of rate hike would bring the central bank’s policy rate, the federal funds rate, to a new range of 3.75% to 4% — its highest level since the end of 2007— from a current range between 3% and 3.25%.
Bloomberg - Vildana Hajric and Katherine Greifeld (2022-10-31)
Was it good or bad this week when Alphabet Inc. told investors that advertising demand that helped swell its top line 50% in two years is starting to soften? Depends on what you mean by bad, and rarely has an argument over definitions meant more for markets and the economy.
Bloomberg - Yoshiaki Nohara and Emi Urabe (2022-10-31)
Japan spent a record 6.3 trillion yen ($42.4 billion) in October to counter the yen’s sharp slide against the dollar, as it tried to limit speculative moves adding to pressure on the currency.
Canada’s oldest bank would like a little more clarity from the country’s central bank, going forward. BMO Economics wrote to investors this week, arguing the Bank of Canada (BoC) needs to be more transparent about their inflation data. After delivering a smaller-than-expected rate hike, the BoC presented a chart to justify its move. The data presented isn’t a regular measure used by markets, and BMO had trouble recreating it. In the future, BMO is requesting more regular releases of this non-traditional measure, since it has a significant impact on the market.
Investment Executive - Nojoud Al Mallees, Canadian Press, Mia Rabson (2022-10-31)
“We can’t support every single Canadian in the way we did with the emergency measures that we put in place at the height of the pandemic,” she said Oct. 19 in a speech to the Automotive Parts Manufacturers’ Association in Windsor, Ont.
It seemed inevitable. The fifty basis point rate hike today by the Bank of Canada might have surprised those who expected a larger increase. Still, it has a lot of people perplexed. Some are even angry.
The Bank acknowledged that while inflation is off its peak, it still remains too high. In the accompanying monetary policy report, the central bank is now expecting inflation to cool to three per cent in late 2023 before returning to the two per cent target by 2024.
Reuters - Balaz Koranyi, Francesco Canepa (2022-10-27)
The European Central Bank will raise interest rates again on Thursday and likely reel in a key subsidy to commercial banks, taking another big step in tightening policy to fight off a historic surge in inflation.
Today's rate hike would make it the sixth consecutive time the bank raises interest rates, making it the fastest monetary policy tightening in its history.
Today, we raised the policy interest rate by 50 basis points to 3.75%. This is the sixth consecutive increase since March. Quantitative tightening continues and is complementing increases in the policy rate. We also expect our policy rate will need to rise further. How much further will depend on how monetary policy is working to slow demand, how supply challenges are resolving and how inflation and inflation expectations are responding to this tightening cycle.
The New Democratic Party is criticizing the Bank of Canada’s rapid interest rate increases, further complicating the political environment for the central bank as it attempts to get inflation under control.
The Bank of Canada is expected to deliver another large interest rate increase this week, as central bank officials remain more concerned about doing too little to combat inflation than doing too much and causing a recession.
In a speech to the Brookings Institution on Oct. 11 that is still making waves around the world, called variously — though not by her — a "manifesto" or the "Freeland Doctrine," the deputy PM and finance minister laid out groundwork for a new global trade regime.
Public borrowing rose to 98% of economic output in September as rampant inflation increased interest payments on what the government owed, the Office for National Statistics said Friday. That’s higher than at any point since 1963, when Britain was still paying off debts accumulated during World War II.
This document provides an update to OSFI’s 2022-2023 ARO to include these environmental factors and OSFI’s Regulatory and Supervisory responses. The annex also notes modifications to policy releases.
“In an environment where we have left the world of low-for-long interest rates (and) low volatility, in an environment where borrowing costs are going to be higher — in my judgment, higher not just in the short-term, but in the medium-term — fiscal discipline is imperative,” Carney said during testimony at the Senate banking committee on Oct. 20. Carney said Canadian governments should take heed. He said targeted aid to households most affected by inflation was justifiable, but that otherwise it’s time to reduce deficits. With the benefit of hindsight, Carney also made the point that federal fiscal supports that were necessary through much of the pandemic went on longer than warranted.
“We agreed on a law to lift banking secrecy with some amendments where we widely expanded the number of groups that can ask to lift banking secrecy,” the head of parliament's finance and budget committee, Ibrahim Kanaan, said in a tweet. “Negotiations with the International Monetary Fund have not stopped, and we have been in constant communication in the past days and hours so there won't be flaws in the agreement that Lebanon aspires to.”
Many economists put the terminal rate, or the likely rate the Bank will max out at before cutting, at four or 4.25 per cent. The Bank of Canada’s Oct. 17 business outlook survey and its accompanying survey of consumer expectations found that both businesses and consumers are expecting short-term inflation to persist and a recession to be around the corner. Despite the gloom, many economists maintained their calls for a four-per-cent peak in interest rate hikes, arguing that the findings could have been much worse.
Deputy Prime Minister Chrystia Freeland says leading Western countries are setting an example by embracing “friend-shoring,” or shifting trade to friendly partners and liked-minded democracies: an approach that would curb some commercial relations with countries such as Russia and China.
Prime Minister Liz Truss apologised for threatening Britain's economic stability after she was forced to scrap her vast tax-cutting plans and embark on a programme of "eye-watering" public spending cuts instead.
France’s central bank head has warned that the recent turmoil in the UK’s bond markets illustrates the “vicious loop” governments face if they undermine efforts by rate-setters to curb soaring inflation.
The panel members include Mr. Stephen Butterfield, Mr. Michel St-Germain and Ms. Jill Wagman. They are all Fellows of the Canadian Institute of Actuaries (CIA) and Fellows of the Society of Actuaries (SOA). Each panel member has extensive experience in risk management, governance, funding, and design of pension plans.
The Governor of the Bank of Canada is dedicated to cooling off inflation. He's raised interest rates at a faster clip than other G7 countries, and there are signs it may be starting to work. But could the tactic also tip us into a recession? Paul Haavardsrud asks Tiff Macklem if there's still a chance to steer the Good Ship Economy in for a soft landing.
The Federal Reserve has just given the Bank of Canada an awful lot to think about.
On Wednesday, the U.S. central bank did a lot more than raise its policy interest rate by another three-quarters of a percentage point, to a range of 3 per cent to 3.25 per cent, a 14-year high. It raised the stakes in the global battle against inflation. It set the bar much higher for the peak of interest rates. It placed the world’s biggest economy on the edge of recession as it pursues this steeper rate path.
Now Canada’s central bank – facing different conditions than the Fed, but in pursuit of the same inflation-vanquishing goal – will have to decide what the strikingly altered picture painted by its U.S. counterpart means for Canadian monetary policy. In trying to strike the right balance in interest rates that will put inflation back in its cage without derailing the Canadian economy, the Bank of Canada now must consider how the Fed’s new stance changes that balance – and how much it can afford to diverge its own policy from that of its huge neighbour.
The members of the Federal Open Market Committee – the body that sets rates – projected that the benchmark rate will need to rise by at least another full percentage point by the end of this year, and will likely peak at somewhere between 4.5 per cent and 5 per cent next year. That’s nearly one percentage point higher than the Fed was talking about in the summer – a striking leap in expectations in the space of a couple of months.
The FOMC members also slashed their forecast for U.S. economic growth to a puny 0.2 per cent this year and 1.2 per cent next year, down from July’s projection of 1.7 per cent in both years. Such an anemic growth pace suggests a U.S. economy one sneeze away from full-on contraction. The committee sees unemployment rising next year to mildly above the estimated long-term normal level.
It all implies that the Fed is braced to put the U.S. economy into a stall, teetering on the precipice of recession, in order to tame inflation – a stance that Fed chair Jerome Powell confirmed Wednesday.
“No one knows whether this process will lead to a recession, or if so, how significant that recession would be,” Mr. Powell said in his post-announcement news conference.
“The chances of a soft landing are likely to diminish to the extent that [interest rate] policy needs to be more restrictive, or restrictive for longer. Nonetheless, we’re committed to getting inflation back down to 2 per cent.”
The Fed’s course correction follows an August inflation report that showed alarming increases in core measures of inflation – even after already substantial rate increases this year, as well as evidence that the U.S. economy has already slowed. The apparent stubbornness of inflation has caused the Fed to toughen its talk, and back it up with a considerably steeper path and higher peak for rates.
The Bank of Canada, which has also been raising its policy rate aggressively and had already raised its rate to 3.25 per cent earlier this month, is facing somewhat different conditions. Canada’s inflation rate is more than a full percentage point below that of the United States, and both Canada’s overall inflation rate and core measures fell more than expected last month. Canadian inflation was never as high as that of the U.S., its economic growth during the COVID-19 recovery has been generally less robust, and its central bank began tightening policy earlier than the Fed did.
Most forecasters have assumed that the Bank of Canada’s key rate would peak at 4 per cent at the most. Many believe that the bank is poised to slow the pace of rate increases as soon as its next policy decision in late October, and could put its rate hikes on hold by early next year.
The Fed’s aggressive tack will require some soul-searching in the corridors of the Bank of Canada. The conditions surrounding its rate-hiking cycle have changed.
Obviously, a stalling or even recessionary U.S. economy would weigh heavily on Canada’s own economic outlook, which still looked relatively healthy when the central bank updated its projections in July. If the Fed is determined to engineer a deeper slowdown, we can expect the Bank of Canada will have little choice but to become more pessimistic in its next forecast update in October.
Canada’s main opposition Conservatives are ratcheting up pressure on the nation’s central bank, although the party’s new leader has put aside his previous call for the governor’s dismissal.
In recent weeks, Prime Minister Justin Trudeau dismissed the suggestion that Canada could be a major supplier of liquefied natural gas to Germany, questioning the “business case.” Germany is wealthy, needs to replace Russian energy, and Canada has the third biggest reserves of natural gas on the planet.
Kishida is trying to ease the blow from a currency that has lost about 20% of its value this year against the dollar. The prime minister has ordered his cabinet to compile an economic package by the end of the month with an unspecified value, as higher commodity prices and a rapid weakening of the yen add to headwinds for small companies and consumers.
The Bank of Canada will start publishing summaries of its monetary policy meetings in an effort to improve transparency and shore up its credibility as it struggles to bring down high inflation.
The Bank of England said it would buy long-term government bonds over the next two weeks to combat a recent slide in British financial assets. The bank’s actions are focused on long-term government debt, where yields have soared in recent days, pushing up government borrowing costs
It’s a little insensitive, but necessary, to raise the issue of retirement saving at a time when many households are struggling to pay for groceries and gas.
Union leaders are calling on the Bank of Canada to halt further interest-rate hikes, arguing that the brunt of a potential recession will be borne by Canadian workers whose wages are already lagging behind inflation.
The Bank of England raised its key interest rate to 2.25% from 1.75% on Thursday and said it would continue to "respond forcefully, as necessary" to inflation, despite the economy entering recession.
The Bank of Canada is pushing back against the idea it will need to cause a recession to get prices under control, while assuring financial markets it will take “whatever actions are necessary” to bring inflation back to target.
The yuan has lost about 4% to the dollar since mid-August to weaken past the psychologically important 7 per dollar level. The local currency also looks set for the biggest annual loss since 1994, when China unified official and market exchange rates. The rapid yuan declines prompted the People's Bank of China (PBOC) to lower the amount of foreign exchange financial institutions must hold as reserves to rein in weakness. read more
Back in 2020, Conservative MP Pierre Poilievre accused the Bank of Canada of being an “ATM” for the Liberal government and its deficit spending, helping fuel inflation. Mr. Poilievre, now leader of his party, has also said if he’s elected prime minister, he’ll replace Tiff Macklem as governor of the central bank with someone who would reinstate the institution’s low-inflation mandate. And he’s promised to increase parliamentary oversight of the bank.
Australia’s central bank faces a potential overhaul of its interest rate-setting board that may result in more monetary policy experts and fewer business people, an independent review suggested.
The Bank of Canada (BoC) has been on an aggressive rate hike path. Earlier this month, they hiked interest rates 75 basis points (bps) higher, bringing the overnight rate to 3.25% — the highest since the Great Recession. RBC noted this is above the 2-3% range the BoC considers to be neutral. Central banks around the world are on a similarly aggressive path to try and curb inflation.
The Office of the Superintendent of Financial Institutions (OSFI) said Tuesday that it’s planning to eliminate a temporary revision to banks’ leverage ratio rules that was introduced in April 2020. The revision allowed banks to exclude certain “high quality liquid assets” from their leverage ratio calculations.
There are charts galore in the Clerk of the Privy Council’s annual report to the prime minister on the state of the federal civil service, and much discussion about mission and morale.
The ECB raised its key deposit rate - how much interest it pays on deposits - to 0.75% from zero, and lifted its main refinancing rate - how much banks have to pay when they borrow money from the ECB - to 1.25% from 0.5%.
Trevin Stratton, Americas economic leader with Deloitte, talks with Financial Post’s Larysa Harapyn about how the Bank of Canada rate seen hitting 4% or higher.
The Bank of Canada has delivered another oversized interest rate hike and signaled that its aggressive campaign to increase borrowing costs isn’t over despite signs that inflation has peaked and the Canadian economy is starting to lose steam.
Canada’s nearly C$300 billion ($228 billion) in Covid relief helped the nation navigate the pandemic’s acute phase, and now in its second act is poised to provide a soft landing for the economy.
Here’s the important part for today — BoC research shows it takes 18 to 24 months for policy to arrive to market. If the BoC wanted stable inflation, it was supposed to do it more than two years ago to get the ball rolling. Instead of coming down in a graceful landing, we’re slamming the shifters down, then up, then… you get it. Trying to force something is almost always worse than encouraging it, but at this point the BoC is stuck. This is a key point to understand the information below.
The Bank of Canada is expected to announce another oversized interest rate increase this week, pushing borrowing costs into “restrictive territory,” despite signs that inflation has peaked and the Canadian economy is slowing down.
Yahoo Finance - Julie Gordon and Fergal Smith (2022-09-06)
Some economists predict the Canadian central bank may signal a pause after its anticipated hike next week, especially after the release on Wednesday of GDP data that suggested the economy may be cooling faster than expected.
The federal government’s taxes and regulations are driving up costs for both farmers and the families who buy the food they produce. Food prices were up 10 per cent in July, the highest increase in more than 40 years.
A reader sent an email recently to share his opinion about what would have happened to Bank of Canada governor Tiff Macklem if he led a private lender, and not an arm’s-length government institution: fired! The ruthlessness of the private sector can be overstated. Mark Little remained CEO of Suncor Energy Inc. despite four workplace fatalities and numerous injuries over a two-year period; it took a fifth death in July to finally prompt Little’s resignation.
Even though that hike is consistent with plans outlined in this year’s budget, the Liberals’ 2021 election platform had originally envisioned a bigger 3-percentage-point increase to the corporate income tax rate (to 18 per cent on all earnings above $1-billion) for big banks and insurers.
When Diane Swonk first attended the Federal Reserve’s annual economic conference in Jackson Hole, Wyo., in the late 1990s, there was a happy hour for women who attended the event. It barely filled a single table.
The reaction was rather different from that to a recent set of public remarks from Powell earlier in the summer, which markets decided, somewhat imaginatively, to interpret as a possibility the Fed would pivot to worrying about recession risks, sending stocks highe
The Ottawa-based central bank said Monday it will replace deputy governor Tim Lane, who retires next month, with an external candidate who will work part-time on a two-year contract. “In a context of increasingly complex and interconnected Canadian and global economies and financial systems, it’s vital that we as an organization constantly adapt and evolve,” Macklem said in a news release. “This change provides an opportunity both to bring fresh and diverse perspectives into the Bank’s consensus-based policy decision-making framework and to ensure the Bank’s executive team has a balanced, streamlined and effective distribution of management responsibility.”
Bloomberg - Abhishek Vishnoi, Michael Wilson (2022-08-29)
The dog days of summer are firmly over as global investors absorb Federal Reserve Chair Jerome Powell’s stern message that interest rates are going higher for longer in a painful fight against inflation.
Investment Executive - Christopher Rugaber (2022-08-29)
Some on Wall Street expect the economy to fall into recession later this year or early next year, after which they expect the Fed to reverse itself and reduce rates.
Mervyn King, the former bank of England governor - and maybe more familiar to Powell than Maradona - famously linked that goal and monetary policy in a speech to illustrate how people react to what they think you are going to do rather than what you actually do.
The Canadian dollar CADUSD strengthened against the greenback on Tuesday, recovering from its lowest level in nearly six weeks, as oil prices rose and investors weighed U.S. economic data that could reduce expected tightening by the Federal Reserve.
San Francisco Federal Reserve president Mary Daly on Thursday said that raising interest rates by either 50 or 75 basis points in September would be a “reasonable” way to get short-term borrowing costs where they need to be to bring inflation down.
This advisory clarifies the interim regulatory capital and liquidity treatment of Deposit Taking Institutions’ (DTIs) and Insurers’ exposures to cryptoassets
Tiff Macklem spent much of the second half of 2021 trying to convince Canadians that rising inflation numbers were not all they were cracked up to be. He now finds himself making a similar argument in the opposite direction – as the dampener of enthusiasm for inflation’s downward turn.
The rate's increase to 1.75% was larger than expected as the bank takes aim at inflation that reached 6.8% in July. It noted that unemployment is very low, falling more than expected last month to 3.2%, and “activity in the Norwegian economy is high."
“Tuesday’s inflation number offers a bit of relief, but unfortunately, it will take some time before inflation is back to normal,” Macklem wrote in an opinion piece for the National Post on Aug. 16. “We know our job is not done yet — it won’t be done until inflation gets back to the two-per-cent target.”
“The dip in the headline rate was entirely accounted for by lower gasoline prices, which dropped to around $1.85/litre by the end of July after breaking the $2 per litre mark in June … Near-term headline inflation readings should continue to track gasoline prices lower. Indeed pump prices fell by another 6 per cent just over the first two weeks of August. Meantime, more cooling in the housing market, easing global supply chain constraints and lower commodity prices will all work to ease price pressure for a wider array of products.”
Yahoo Finance - Rae Wee and Vidya Ranganathan (2022-08-12)
The Japanese yen fell the most against a resurgent U.S. dollar on Friday, as a two-day rally in equities conceded to market expectations that the Fed will have to do a lot more to contain inflation.
Weakening the independence of regulators would undermine reforms to bolster Britain's finance industry, the head of the Bank of England said on Thursday, in a rebuff to proposals from the leading candidate to be the country's next prime minister.
Mexico and Peru’s central banks are expected Thursday to hike their key interest rates to the highest point in more than a decade, as they continue their record tightening cycles to try to wrestle persistent inflation back under control.
Overnight swap markets suggest about a 45 per cent chance that officials led by Governor Tiff Macklem will increase borrowing costs by three quarters of a percentage point at their Sept. 7 decision. A move of that magnitude would bring the policy rate to 3.25 per cent, the highest since April 2008.
With inflation higher than it has been in decades, there is no shortage of critics of the Bank of England. Still, the bulk of the blame seems largely unfounded.
The U.S. Department of Commerce is lowering tariffs against most Canadian softwood producers by half, but the long-running trade dispute lingers as Canada plans to appeal the decision to maintain punitive duty rates.
Japan's Government Pension Investment Fund (GPIF) reported on Friday an investment loss of 3.75 trillion yen ($28.13 billion) for April-June, the second consecutive quarter of negative returns, as economic slowdown fears hit global stock markets.
It’s hard not to think of Eeyore when reading the commentary that the Bank published Thursday, in conjunction with the announcement that it would be raising rates by 50 basis points, the biggest increase since 1995 (and the biggest ever since the BoE gained its independence under Tony Blair and Gordon Brown in 1997). This is what it had to say about future prospects:
Most investors and economists predict the BoE will increase its benchmark rate by half a percentage point to 1.75%, its highest level since late 2008 at the start of the global financial crisis, when it announces its decision at 1100 GMT.
The appointment comes only a few weeks since the left-leaning Silvina Batakis was tapped as economy minister after the more moderate Martín Guzmán abruptly quit, saying he wasn't getting political support in dealing with Argentina's economic woes.
Yes, Rogers’ responses to the CRTC’s queries were partly redacted, but the regulator kept its word and divulged enough details to give Canadians a basic understanding of how a coding error caused the company’s network to malfunction earlier this month.
Argentine Economy Minister Silvina Batakis “agreed on the importance of decisive program implementation,” IMF Managing Director Kristalina Georgieva tweeted Monday after meeting the new minister, who retweeted the comment.
That’s the view of former New Zealand central bank governor Graeme Wheeler and Bryce Wilkinson, a senior research fellow with the New Zealand Initiative think tank, who have co-authored paper released Tuesday in Wellington titled: “How Central Bank Mistakes After 2019 Led to Inflation.”
"The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 0.50 per cent, 0.75 per cent and 0.00 per cent respectively, with effect from 27 July 2022," the bank said, referring to various rates the central bank charges banks for loans, and fees for keeping deposits at the central bank for short time period.
“Our credibility is being tested, and that was an important reason why we took an unusually large step last week to send a clear message to Canadians they can be assured that we’re going to control inflation,” Macklem told CTV News’s Evan Solomon on Wednesday following the June inflation figures.
It will be the first autumn national election for more than a century in Italy, where the second half of the year is normally taken up with getting the budget law through parliament.
If the U.S. Federal Reserve killed off forward guidance in June, the European Central Bank may have just hammered the final nail in the coffin of a tool officials had long used to provide monetary policy signals to financial markets.
Investment Executive - Nojoud Al Mallees (2022-07-21)
“A big difference now is sort of a strongly held notion that it’s mostly the job of the Bank of Canada to look after inflation control,” said Williamson. “In the 70s, that wasn’t true.”
Yahoo Finance - Volodymyr Verbyany and Daryna Krasnolutska (2022-07-20)
Ukrainian officials have for weeks explored debt restructuring as the country’s funding options dry up and the war destroys its industry. The junk-rated sovereign faces mammoth $1.4 billion foreign-debt redemption and interest payments in September, according to Finance Ministry data.
Days after Russian troops invaded Ukraine, the G7 and a host of allies in Europe and Asia declared a freeze on the assets of the Central Bank of Russia.
The decision will come hours before that of the European Central Bank, which will consider a bigger-than-expected 50 basis point rate increase to tame soaring inflation. While rising fuel and commodity costs have pushed Japan's inflation above its 2% target, the BOJ is in no rush to withdraw stimulus as slowing global growth cloud the outlook for an economy yet to fully recover from the COVID-19 pandemic's scars.
Canada’s 23 prime ministers have each left a legacy, and each of those legacies has an effect on all Canadians. One element critical to an analysis of each prime minister is whether he or she left the federal government more or less indebted than when first taking office.
The Bank of Canada is set to deliver a super-sized interest rate hike this week, as it accelerates efforts to withdraw stimulus from an overheated economy and rein in soaring inflation.
G&M - BARRIE MCKENNA AND MARK RENDELL (2022-07-13)
The Bank of Canada increased its benchmark interest rate by one percentage point on Wednesday, the most aggressive rate hike since 1998 and a larger move than investors and private-sector economists were expecting.
First, inflation is too high, and more people are getting more worried that high inflation is here to stay. We cannot let that happen. Restoring price stability—low, stable and predictable inflation—is paramount.
Late on june 13th, a curious article appeared in the Wall Street Journal. It said that the Federal Reserve was “likely to consider” raising interest rates by 0.75 percentage points at its meeting on June 15th.
The article was unusually silent about its sources. And it proved uncannily prescient. Two days later the Fed did indeed raise interest rates by that amount, its biggest increase in 28 years. Many investors believe the central bank had used the press to warn financial markets about what it would do in advance (albeit not very far in advance). That would make the Journal story an unconventional example of “forward guidance”.
A senior civilian Mountie sent a strongly worded letter to RCMP Commissioner Brenda Lucki last year, accusing her of bowing to political pressure and displaying “unprofessional and extremely belittling” behaviour to officers investigating the worst mass shooting in Canadian history.
Canada’s bank regulator plans to better protect the country’s financial system by limiting how much homeowners can borrow against the value of their homes.
The Ford government’s appointment of a Bay Street lawyer and Tory fundraiser to chair Ontario’s securities regulator has prompted two high-profile resignations, as well as concerns about her conduct and her dissenting views inher decisions regarding the laws that govern the capital markets.
Bloomberg - Giulia Morpurgo and Libby Cherry (2022-06-27)
For months, the country found paths around the penalties imposed after the Kremlin’s invasion of Ukraine. But at the end of the day on Sunday, the grace period on about $100 million of snared interest payments due May 27 expired, a deadline considered an event of default if missed.
In the cross-border context, the BIS Innovation Hub (BISIH) has been leading practical experiments to show how central bank digital currencies (CBDCs) could help deliver faster, cheaper and more transparent international payments.
Monetary regimes don’t fall often. Half a century ago, in 1971, Richard Nixon ended the Age of Gold by formally eliminating the dollar’s peg to the precious metal. Since then, the dollar and other currencies have rested on fiat—they’re worth something because governments say they are. You could call this the Age of Credibility. In place of gold, currency’s anchor is the trust in the central banks that issue them. Now credibility appears to be at an end. With central banks desperately ripping up their playbooks to try to rein in inflation that’s veered far beyond target, they’re admitting they’ve been wrong, and giving up on trying to steer the markets on their plans for the future.
“The technology and the technical issues are not that difficult, but once you have more than one jurisdiction involved, there are the policies and the regulations that of course, need to be reconciled,” said the BIS’s Hyun Song Shin. “What are some of the legal differences across jurisdictions that might mean that smooth flows might be impeded? So, there are more of these policy challenges that actually rear their heads in the wholesale application.”
Investment Executive - Christopher Rugaber (2022-06-22)
Inflation has proved higher and far more persistent than he or the Fed’s staff economists had foreseen. And at a policy meeting last week, Powell announced an unusual last-minute switch to a bigger interest rate hike than he had previously signaled — and then followed with a news conference that many economists described as muddled and inconsistent.
One of Canada’s largest commercial banks fired a broadside at Prime Minister Justin Trudeau’s government, warning that high levels of federal spending are hurting the fight against inflation.
“We think it was obvious inflation would be an issue over the last couple of years, and we believe it will continue to be an issue until we get the money supply under control,” Elass told advisors during the First Trust ETF Institute, held at the Royal York Hotel.
Finance Minister Chrystia Freeland and U.S. Treasury Secretary Janet Yellen have pledged to help central banks tackle inflation by cutting back on deficit spending, but Ms. Yellen was cool to reopening Keystone pipeline talks as a way to reduce oil prices.
Almost exactly a decade ago, Mario Draghi, then the president of the European Central Bank, promised to do “whatever it takes” to save the euro from destruction. At the time, Greece was on the verge of stumbling – or being frogmarched – out of the euro zone; Italy, the region’s third-largest economy, was so mired in debt that it, too, seemed a candidate for departure.
All flash and no (illicit) cash. That was the key takeaway from the Cullen Commission‘s final report looking at BC’s money laundering problem. Despite Canada talking a big game on anti-money laundering, its policies are ineffective. The Commission condemned federal anti-money laundering resources, and found Canada ignored the province’s calls for help. Austin Cullen, who led the Commission, concluded Federal resources aren’t reliable. The Province should therefore establish its own dedicated anti-money laundering enforcement team.
Freeland said her plan to address inflation and the affordability crisis has five parts: respecting the role of the Bank of Canada, investing in workers, managing the debt, creating good jobs and funding the suite of programs that make up the Affordability Plan.
Under the category of government relations, FP Canada stated it would like governments to “recognize financial planning as a profession and support its broad accessibility, through appropriate policy and regulatory frameworks” over the next three years.
G&M - ANN SAPHIR AND HOWARD SCHNEIDER (2022-06-15)
The Federal Reserve on Wednesday approved its largest interest rate increase in more than a quarter of a century to stem a surge in inflation that U.S. central bank officials acknowledged may be eroding public trust in their power, and being driven by events seen increasingly out of their hands.
Justin Trudeau’s finance minister will use a keynote speech to make the case that Canada’s government is ready to tackle affordability issues as consumer prices soar and borrowing costs rise sharply.
“Some think the Fed could deliver a surprise 75bp hike at the June meeting. Never say never in these circumstances but we think that remains very unlikely,” Evercore ISI analysts wrote Friday.
The central bank, which had been expected to pause after hiking to 1.5%, is now predicted to lift the benchmark cost of borrowing to 2% by this time next year, according to economists surveyed by Bloomberg last week.
Central banks have scarcely covered themselves in glory these past few years. Most have one goal and one goal only: to keep inflation low. In most countries, they have spectacularly failed at this job. In much of the developed world, inflation has reached many multi-year highs. But bar Turkey’s, I can’t think of a central bank whose record has been as lamentable as the European Central Bank. At least its Turkish counterpart has the excuse of being under the thumb of Recep Erdogan, the country’s president, whose contributions to economics are on a par with Vladimir Putin’s to international diplomacy.
Bill Morneau isn’t wrong about the Liberal government’s failure to deliver on a long-term economic growth plan. It’s just odd that he talks about it as if it’s someone else’s fault. An awful lot of what he has criticized happened on his watch.
The Federal Reserve, the European Central Bank and the Bank of England all preside over inflation rates that have surged to quadruple their 2% targets. One of their brethren is highly skeptical of their chances of success in calming price increases. It may turn out that they’ve been lucky rather than good in achieving price stability in recent years — and their luck has run out.
At the start of the hiking cycle, Chair Jerome Powell said the goal was “getting rates back up to more neutral levels as quickly as we practicably can.” In May, however, he walked back from the concept of neutral -- a level that neither slows nor speeds up growth -- cautioning that the discussion had a “sort of false precision.”
Former finance minister Bill Morneau delivered a pointed critique of the federal Liberals’ economic policies, along with a series of recommendations for kickstarting growth, in his first public speech since leaving political life two years ago.
"With ... inflation persisting well above target and expected to move higher in the near term, the [bank] continues to judge that interest rates will need to rise further," the central bank said in a statement.
For what it’s worth, Bay Street’s average forecast ahead of the release was for growth of about five per cent, so there will be some disappointment, or maybe relief, considering growth at that pace would continue to fuel worries that the central bank had lost its grip on inflation. The Bank of Canada has been struggling to get a read on prices, but it appears to have a better idea of what’s going on with GDP.
If worrying about an overheating economy wasn’t enough trouble, Bank of Canada Governor Tiff Macklem enters a crucial six-week period in his battle against inflation with an unexpected new problem: questions about his own credibility.
The Bank of Canada is expected to announce another oversized interest rate increase this week, part of its effort to push Canadian borrowing costs rapidly higher in the hope of slowing the pace of consumer price growth.
The guidelines, issued by the Office of the Superintendent of Financial Institutions (OSFI), call for annual climate-related disclosures on governance, strategy, risk management, metrics and targets, and greenhouse gas emissions, as well as a transition plan, for periods starting October 2023.
All participants at the Federal Reserve’s May 3-4 policy meeting backed a half-percentage-point rate increase to combat inflation they agreed had become a key threat to the economy’s performance and was at risk of racing higher without action by the U.S. central bank, minutes of the session showed on Wednesday.
Federal Reserve officials discussed the possibility of moving the US central bank to a “restrictive” policy stance that would better fight inflation through more aggressive interest rate increases, but worried that this could undermine the strong recovery in the jobs market.
The ruble was stronger for a fifth day against the dollar, trading up 2% even after Russia on Monday loosened capital controls by reducing the amount of foreign currency exporters are required to convert.
“It is clear to us all that we are living through a period of global volatility. We have COVID. We have the Russian invasion of Ukraine. We have China’s zero-COVID policy,” Freeland told reporters by teleconference from Munich, Germany after a G7 meeting.
UK pension schemes should not ignore climate change, a senior executive at The Pensions Regulator said on Monday, the first watchdog to weigh in after a top HSBC banker was suspended after playing down the financial risks of climate change.
Alberta Premier Jason Kenney announced his resignation as United Conservative Party leader Wednesday after receiving 51.4 per cent approval of his leadership from UCP members.
Born in 1972, Sun joined the People’s Bank of China in 1996 and has spent most of his career at the monetary policy department. He’s been at the forefront of the PBOC’s transformation into a modern central bank over the years and took part in many key milestones, including creating the interbank bond market, launching open market operations, establishing the yuan exchange rate forming mechanism, and most recently, revamping the interest rates.
The end of the carve-out could be the final straw in Russia’s debt saga after almost three months of war in Ukraine. It’s managed to make all its payments to creditors so far, weaving through the tangle of sanctions that closed off some avenues.
Federal Reserve Chairman Jerome Powell said Tuesday that the central bank will continue to raise short-term interest rates — which will likely slow economic activity — until there is “clear and convincing evidence” that inflation is coming down.
"We have asked banks to reassess their projections and capital trajectories in the light of the new macroeconomic picture, also considering adverse scenarios," Enria told Italian daily Repubblica.
On this episode of Editor's Edition, Yahoo Finance Canada's Alicja Siekierska and the Public Policy Forum's Sean Speer discuss the criticism being aimed at the Bank of Canada. Speer argues that the debate around the Bank’s decisions – as well as of other institutions – is justified in the post-pandemic recovery.
The Bank of Canada needs to keep raising interest rates to tackle runaway inflation, deputy governor Toni Gravelle said on Thursday – although how high rates go will depend on how the housing market responds to rising borrowing costs.
In his loud and frequent criticism of the Bank of Canada, Pierre Poilievre has been getting a lot of mileage out of how the central bank started the COVID-19 crisis thinking deflation, not inflation, would be the country’s big worry. The Conservative Party leadership candidate recently called the bank’s brain trust “financially illiterate” for getting the inflation call so badly wrong.
Speaking in Montreal, the deputy governor outlined how higher commodity prices, global supply chain issues, and the reopening of economies are pushing up inflation. Gravelle also said that the bank’s near-term forecasts for price gains are likely to be revised up, adding that “inflation pressures have been higher and more tenacious than we expected.”
Here’s what Poilievre, member of Parliament for Carleton, a riding on the outskirts of Ottawa, said he’d do with Macklem during a debate with the other leadership candidates in Edmonton on May 11: “I would replace him with a new governor who would reinstate our low-inflation mandate, protect the purchasing power of our dollar, and honour the working people who earned those dollars.”
Most of the nays were Republicans, though a few Democrats, including Robert Menendez and Elizabeth Warren, joined them. Menendez said Powell had not done enough to promote diversity in the Fed's leadership, while Warren said he had fallen short on bank regulation.
The Bank of Canada’s leaders dislike how they’ve been dragged into a partisan political contest. But they didn’t need Pierre Poilievre’s emergence as Canada’s answer to former United States congressman Ron Paul to know that a segment of the population has lost faith in them.
The Federal Reserve warned of deteriorating liquidity conditions across key financial markets amid rising risks from the war in Ukraine, monetary tightening and high inflation in a semi-annual report published Monday.
“We have to fix the supply problem,” Rogers said this week in an interview, her first since replacing Carolyn Wilkins as governor Tiff Macklem’s No. 2 in December. “We keep trying these different things to dampen demand and Canadians still want houses. We have immigration coming in, (and) we have a strong economy.”
Fed chair Jerome Powell said he expects the committee will consider increasing the policy rate by 50 basis points at each of its next two meetings, which would bring the Fed Funds rate back above prepandemic levels by the middle of the summer. At the same time, he seemed to rule out an increase of 75 basis points, saying that “is not something the committee is actively considering.”
What was striking about the speech this week from the Bank of Canada’s No. 2 official on the importance of central-bank independence wasn’t what she had to say. It was that the bank felt compelled to say it at all.
Turkey’s central bank has cut rates by 5 percentage points since September, to 14%, despite high inflation rates — before pausing them in January. The Turkish lira lost 44% of its value against the U.S. dollar last year.
The Bank of England looks poised to raise interest rates on Thursday for the fourth time since December, the fastest increase in borrowing costs in a quarter of a century as it tries to quell the danger from the leap in inflation.
In the space of a few short months, the prevailing narrative on U.S. inflation has veered from “It’s transitory” to “We have a problem.” This week, the Federal Reserve took another step toward acknowledging this, raising its policy rate by 50 basis points and leading investors to expect a faster pace of tightening from now on. That’s fine, you might say, the facts have changed – and to paraphrase John Maynard Keynes, when the facts change, you change your story. What’s interesting is that the story has changed more abruptly than the facts.
The Bank of Canada has ramped up efforts to defend its credibility amid soaring inflation and pointed criticism from Conservative politicians who say it has lost its independence from the government.
Recent research from a number of sources also cast doubt on Powell’s statement. As such, rather than buying into the Fed’s fantasy, inventors should exercise caution and shift away exposure from cyclical sectors into more defensive ones.
“(We’re coming) out of the deepest recession we’ve ever had,” Macklem said during testimony at the Senate banking committee late on April 27. “We got a lot of things right. We got some things wrong, and we are adjusting.”
The Bank of Canada is prepared to raise interest rates “forcefully if needed” to get inflation under control, Governor Tiff Macklem said Wednesday, doubling down on the message that Canadian households and businesses should brace for higher borrowing costs over the coming year.
The Liberals infused the infrastructure bank with $35 billion in federal financing to pull in two or three times that in private dollars, arguing it would stretch Ottawa's capacity to fund the building of more roads, bridges, energy, water and wastewater systems.
Poilievre, who lost his role as Finance critic ever since he decided to run for his party’s main job, was not there to butt heads against Bank of Canada Governor Tiff Macklem and Deputy Governor Carolyn Rogers during the Parliamentary Finance Committee on Monday.
The Bank’s primary focus is inflation. Consumer price index (CPI) inflation in Canada hit a three-decade high of 6.7% in March, well above what we projected in the January MPR. The war has driven up the prices of energy and other commodities, and it is further disrupting global supply chains. While most of the factors pushing up inflation come from beyond our borders, with the economy in excess demand, we are facing domestic price pressures too. About two-thirds of CPI components are growing above 3%, which means Canadians are feeling inflation across their household budgets, from gas to groceries to rent.
In the decade leading up to the pandemic, Canadian governments collectively accumulated approximately $525 billion in net debt — this despite a growing national economy in nine of the 10 years. COVID-19 then exacerbated the problem, as governments increased spending and amassed hundreds of billions in additional debt during 2020 and 2021. In its recent budget, the federal government alone projects its net debt will surpass $1.3 trillion this fiscal year (2022-23) and continue climbing until at least 2026-27.
FT - Victor Mallet, Leila Abboud and Sarah White (2022-04-25)
Emmanuel Macron has defeated his far-right rival Marine Le Pen to be re-elected president of France, vowing to tackle the country’s “doubts and divisions” during his second five-year term.
The Bank of Canada might consider hiking its benchmark interest rate by more than 50 basis points in a single move as it pushes borrowing costs higher to try to quell runaway inflation, Governor Tiff Macklem suggested on Thursday.
FP - William Robson and Alexandre Laurin (2022-04-22)
The 2022 federal budget highlights their success. Ottawa’s last pre-COVID projections, in its 2019 fall update, showed federal spending at $421 billion in fiscal year 2024-25. The 2022 budget’s projections have it at $479 billion a year (adding back $2 billion in pension obligations the government stopped including meanwhile). That’s $58 billion more, long after COVID-related measures are gone. The slogan we should have been hearing is “Build back bigger!”
Western countries should not appease Russia following its invasion of Ukraine even if there are difficult economic consequences, Bank of England Governor Andrew Bailey said on Thursday.
With every monthly release of Canada’s consumer price index, the gap between inflation and the Bank of Canada’s 2-per-cent target grows more cavernous – and the task to close it increasingly Herculean.
"Under the current conditions we have made the decision not to reveal the list of organisations connected to SPFS. Still, this list is available for users of the system," the Russian central bank told Reuters in an email. The institution used to publish a list of SPFS users on the website but recently stopped the practice, per Bloomberg.
Reuters - Howard Schneider and William Schomberg (2022-04-20)
Major central banks, already plotting interest rate hikes in a fight against inflation, are also preparing a common pullback from key financial markets in a first-ever round of global "quantitative tightening" expected to restrict credit and add stress to an already-slowing world economy.
Canada sanctioned Russian central bank Governor Elvira Nabiullina and 13 other “close associates of the Russian regime” in a fresh round of penalties related to the war in Ukraine.
European governments -- and companies -- are still grappling with what the decree means in operational terms. The person said the EU would work with national authorities to inform European companies that hold contracts of the assessment and provide guidance. The Dutch government has backed the EU analysis and said it won’t allow its companies to follow through with the Russian payment demand.
Had I been in charge of titling last week’s federal budget, it would have been called something like “Circling the toilet bowl of socialism.” We’re not quite in the bowl yet, but with this budget, we’re circling it. The Liberals instead called their budget “A Plan to Grow Our Economy and Make Life More Affordable,” a far less accurate description, for their policies are exactly the opposite of what they should be if they really want to grow the economy. As a matter of basic economics, to encourage economic growth, taxes must be low, simple, predictable, and broadly applied, in order to minimize distortions and provide certainty. The Liberals have broken all the rules of sensible taxation by making taxes higher, more distortionary, more arbitrary, and less certain.
For New Zealand, having the most hawkish central bank in Asia doesn't go far enough. Officials are intensifying their battle against inflation, even as confidence ebbs and the vital housing industry teeters. Is the country racing toward a recession?
The Bank of Canada is expected to announce its first oversized interest-rate hike in more than two decades this week after hawkish comments from the country’s top central bankers and growing signs that the economy is overheating.
Russia, hit by Western sanctions, has called on the BRICS group of emerging economies to extend the use of national currencies and integrate payment systems, the finance ministry said on Saturday.
Russia will halt bond auctions for the remainder of 2022 due to prohibitive borrowing costs, Finance Minister Anton Siluanov was quoted as saying by Russian newspaper Izvestia.
The federal government’s 2022 budget plan lays out more than $56-billion in new spending over six years, as part of a package Finance Minister Chrystia Freeland says will boost innovation and green technology.
Finance Minister Chrystia Freeland will table a budget on Thursday that promises $10-billion to make housing more affordable for Canadians, provides $8-billion in new defence spending, and aims to spur economic growth through green initiatives and a small-business tax cut.
After months of debate, the Federal Reserve has a plan to shrink its $9tn balance sheet as it tries to tighten monetary policy and tackle the highest inflation in decades.
It was the centrepiece of the federal Liberal government’s first innovation strategy: a $950-million “supercluster” program aimed at bringing together academia and business to collaborate in unprecedented ways, spinning out companies and creating jobs, economic growth and intellectual property.
BNS-T+0.77%increase
chief executive Brian Porter is calling on Ottawa to create a federal commission to draw a long-term economic road map, citing the need for new investments to build prosperity and counter mounting headwinds facing Canada’s economy.
Bill C-249, which saw its first reading in early February, would call on the Minister of Finance to consult with crypto industry innovators designated by provinces and territories to develop the framework. The bill also states that policy must focus on lowering barriers to entry in the crypto sector and protect industry innovators from crushing administrative burdens.
One week before the release of the federal government’s pivotal 2022 budget, Royal Bank of Canada chief executive Dave McKay was uneasy as he surveyed the daunting challenges ahead for Canada’s economy.
Bank of Canada governor Tiff Macklem is taking on a new role overseeing the global banking system as the chair of a group of central bankers that oversees the Basel Committee on Banking Supervision.
While economists expect the bank to gradually raise its rate another half-dozen times or so this year, there's a growing sense that the bank may need to start moving faster and more dramatically than anticipated to rein in inflation, which is already at its highest level in a generation.
Although a majority of Canadians are still doubtful inflation will be reined in, even a small pick-up in confidence is a welcome development for policymakers led by Governor Tiff Macklem. Bank of Canada officials have been warning they plan to act decisively with aggressive rate hikes to quell inflation, which has hit a three-decade high of 5.7%.
Dennis Mitchell, CEO and CIO at Starlight Capital, talks with Financial Post’s Larysa Harapyn about why the Bank of Canada is now ‘talking tough’ on inflation.
Yahoo Finance - Brian Platt, Robert Tuttle (2022-03-30)
Trudeau’s blueprint promises industry a tax credit to help pay for carbon-capture projects, details of which may come as soon as next week’s federal budget. It doesn’t, however, include a specific emissions cap on the fossil-fuel sector, which accounts for about a tenth of Canada’s total economic output.
Ukraine proposed adopting neutral status in exchange for security guarantees at talks with Russia in Turkey, meaning it would not join military alliances or host military bases, Ukrainian negotiators said on Tuesday.
Chris Chezepock had the nasty shock last year of finding out he was one of the thousands of taxpayers whose online accounts with the Canada Revenue Agency had been accessed by hackers looking to fraudulently obtain pandemic benefits.
Higher interest rates won’t guarantee rain on the Prairies this summer, and Macklem has no influence over international oil prices. Bay Street economist David Rosenberg’s argument that central banks are about to trigger a recession is a good one. Alas, if you’re Macklem, and your primary job is keeping year-over-year increases in the consumer price index at about two per cent, the most recent set of data leave you with only one choice: reel faster.
Supply chain issues exist, but not to the extent they’re making them out to be — especially before Ukraine. As we explained last week, this isn’t a regular amount of demand failing to be met. This is excess demand for goods, far more than normal supply levels satisfy. The increased demand is the intended consequence of loose monetary policy. The BoC actively tried to create demand that outran supply, to create more inflation.
The BoC estimates 1.75% is the low range of the neutral policy rate, which will be hit within months. A neutral policy rate is the point where monetary policy provides no influence. Below the neutral is expansionary, meaning stimulus for economic growth. Above the neutral rate is when monetary policy slows growth. The BoC estimates the neutral range to be between 1.75% and 2.75%, with more forecasts now predicting the higher end of the range will be needed.
Council on Foreign Relations - Zonhyuan Zoe Liu (2022-03-25)
An unintended consequence of Western punitive sanctions could be strengthening a Russia-China de-dollarization partnership. Joining such a partnership may also appeal to India. India has reportedly expressed interest in jointly exploring with Russia and China an alternative to SWIFT that would allow it to trade with countries under U.S. sanctions.
Yahoo Finance - Giulia Morpurgo, Laura Benitez and Lyubov Pronina (2022-03-18)
JPMorgan Chase & Co. has processed the funds and sent the money on to Citigroup Inc., the people said, spurring optimism that the bonds may still be settled in dollars. Bondholders, however, are still waiting for the $117 million payment. Four investors in Europe and three in Hong Kong had yet to receive funds as of 9 a.m. in London. S&P Global Ratings warned that the “technical difficulties” in getting the money to investors was increasing the risk of a default -- either this time around or in the future.
Investment Executive - Daniel Calabretta (2022-03-18)
In 2020, the BoC published a background note about its official position on a CBDC pertaining to public policy, design, technology and risk management issues the central bank was considering as it builds out its capacity to issue a digital currency if the need arises.
Revenue could surpass projections by as much as C$30 billion ($23.6 billion) over the next two years, though the governing Liberals are likely to book a more conservative amount given extreme levels of uncertainty and volatility as a result of Russia’s war in Ukraine.
The Fed’s next steps after today’s initial bump will be critical. With inflation clearly not “transitory,” the Fed may have to lean on some 0.50% hikes (that hasn’t happened since 2000) and a reduction in its $9 trillion balance sheet (that’s never been attempted at this scale) if price increases get even worse.
Bank of Russia expanded its gold reserves almost sixfold since the mid-2000s, creating the world’s fifth-biggest stockpile that’s valued at about $140 billion. It’s the type of asset it could sell to shore up the ruble, which has plunged as global economies isolate Russia following its invasion of Ukraine.
Saudi Arabia is in active talks with Beijing to price some of its oil sales to China in yuan, people familiar with the matter said, a move that would dent the U.S. dollar’s dominance of the global petroleum market and mark another shift by the world’s top crude exporter toward Asia.
So Russia has the money to pay but says it can’t because of the sanctions that have restricted banks and frozen much of its foreign currency reserves. Ratings agencies have downgraded Russia’s credit rating to below investment grade, or “junk.” Fitch rates Russia “C,” meaning in Fitch’s view “a sovereign default is imminent.”
The Federal Open Market Committee meets Tuesday and Wednesday, as it seeks to address the worst inflation in 40 years amid new risks to economic growth. Whatever the Fed decides on interest rates, it’s worth recalling how the central bank arrived at this unhappy moment.
The Order lays out a national policy for digital assets across six key priorities: consumer and investor protection; financial stability; illicit finance; US leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.
The day after the Bank of Canada raised its policy interest rate off its pandemic-emergency floor, the central bank’s Governor, Tiff Macklem, faced down worried questions about the strains rising borrowing costs were about to place on the backs of Canadians.
Bank of Canada Governor Tiff Macklem said the central bank could be aggressive in pushing up borrowing costs this year, as inflationary pressures broaden and commodity prices move sharply higher in response to Russia’s invasion of Ukraine.
The rate of change in financial markets has accelerated since Russia invaded Ukraine. With the market plumbing thus far proving sufficiently robust to accommodate wilder price swings accompanying risk transfers, even the relatively humdrum world of government debt is having to adapt. Specifically, the euro zone’s guardians of monetary stability, led by the European Central Bank, are having to intervene to reduce friction in their capital markets. It should be a wake-up call that liquidity can’t be taken for granted.
The Bank of Canada has raised its policy interest rate, pushing up borrowing costs for the first time since 2018 and kicking off a series of rate hikes despite heightened economic uncertainty caused by Russia’s invasion of Ukraine.
G&M - HOWARD SCHNEIDER AND LINDSAY DUNSMUIR (2022-03-02)
Federal Reserve Chair Jerome Powell said on Wednesday he would support a 25-basis-point interest rate hike at the U.S. central bank’s March 15-16 policy meeting and would be “prepared to move more aggressively” if inflation does not abate as fast as expected.
"In the current sanction situation foreign entrepreneurs are forced to be guided, not by economic factors, but to make decisions under political pressure," Prime Minister Mikhail Mishustin told a governmental meeting.
Russia's central bank reserves have effectively been frozen amid the decision, notes Reid. The country had about $630 billion of foreign reserves, a majority of which likely resides directly with G10 banks and central banks, says Reid.
Last week, as the world watched police restore public order in downtown Ottawa, the federal government’s hostility to resource development was dealt a huge financial blow that may in the end land-lock Canada’s immense oil reserves. Trans Mountain Corp. (TMC) announced that total costs for its pipeline expansion have ballooned 70 per cent to an eye-watering $21.4 billion, up from the latest estimate of $12.6 billion, and almost triple the initial estimate $7.4 billion. And, no surprise, the project’s projected completion was extended to the third quarter of 2023.
FP - Owen Walker in London and Max Seddon in Moscow (2022-02-25)
The sanctions already put in place over the past week took aim at smaller banks, a handful of oligarchs, the Nord Stream 2 gas pipeline and the trading of Russia’s sovereign debt. But experts say that to really squeeze Putin, the West needs to take aim at the country’s biggest banks.
Bloomberg - Garfield Clinton Reynolds (2022-02-25)
Russia still has about $300 billion of foreign currency held offshore -- enough to disrupt money markets if it’s frozen by sanctions or moved suddenly to avoid them.
The BoC is still forecast to hike interest rates next week, possibly with more reason. BMO reiterated they expect a full (25 bps) hike to the overnight rate at the March 2 meeting. At this time, the bank doesn’t see the crisis spilling over beyond Ukraine. If that occurs, it might need to be reviewed. The risk of uncertainty means the unlikely scenario of a 50 bps hike in Canada can be safely “put to bed.”
Housing The federal government has an important role to play, working with municipalities and provinces, in increasing supply, including a mix of rental supply. I think now is the time for new energy in the building of co-ops. We also need to do things in terms of the financialization of housing. We need to see housing as homes for Canadian families and not a financial asset. I want to be very clear that our government has absolutely no intention of altering the position on capital gains on the principal residence of Canadians. That is a very important part of how Canadian society works. Where we need to be thoughtful is in foreign money flowing into Canadian housing and turning that into a financial asset. That’s not what Canadian houses are meant to be for.
Kristen Rose, the OSC’s manager of public affairs, said the regulator is “aware” of posts earlier this week from the Twitter accounts of Kraken CEO Jesse Powell and Coinbase CEO Brian Armstrong, which criticized the invocation of the Emergencies Act and advocated for the importance of non-custodial crypto wallets, with Armstrong promoting his own company’s such product. Non-custodial wallets are controlled directly by an individual rather than by a third party such as a cryptocurrency-trading platform, making it more difficult for law enforcement to freeze or seize the funds they hold.
The CPI forecast is climbing more aggressively than the BoC expects. The central bank last forecast 4.2% annual growth for 2022, up from their previous forecast of 3.2% growth. Independent expectations are rising very quickly, as fewer people see monetary policy moving fast enough to cool inflation.
Deputy Prime Minister Chrystia Freeland said financial institutions have started freezing bank accounts belonging to protesters involved in blockades based on information from the RCMP, and predicted the number of accounts being targeted will rise in the coming days.
The Canadian Bankers Association confirmed the Royal Canadian Mounted Police has provided a list to the banks. The banks are still seeking clarity from law enforcement on how to handle the alleged protesters’ accounts, according to people familiar with the matter. But Finance Minister Chrystia Freeland said some accounts have already been frozen.
Canadian inflation didn’t hear your transitory call apparently — it’s widening to other categories. Statistics Canada (Stat Can) data shows the consumer price index (CPI) soared in January. The annual growth rate reached 5.1% for the month, advancing from 4.8% a month before. Canada’s inflation hasn’t grown this fast since September 1991, three decades ago. To make things worse, high inflation is being felt across categories, making it harder to slow down.
Deputy Governor Tim Lane discusses how the Bank of Canada approached decision making during the unprecedented upheaval brought on by the COVIDâ19 pandemic.
Investment Executive - Christopher Rugaber (2022-02-15)
James Bullard, president of the Federal Reserve Bank of St. Louis, on Monday reiterated his call for the Fed to take the aggressive step of raising its benchmark short-term rate by a full percentage point by July 1. Esther George, president of the Kansas City Fed, expressed support for a more “gradual” approach. And Mary Daly of the San Francisco Fed declined to commit herself to more than a modest rate hike next month.
Federal emergency act measures will expand the powers of Canada’s banks and financial intelligence agency to monitor and stem the flow of funds to protesters who have blocked downtown Ottawa and key corridors, as the federal government escalates its efforts to end the disruptions.
The way these battles conventionally work is this: a country tries to weaken its currency, to give it an advantage in global trade. It’s what President Donald Trump threatened to do with China, which he accused of intentionally devaluing the yuan.
But soaring inflation has changed priorities, since a stronger currency tends to help contain inflation by making imported goods cheaper. Strategists at TD Securities discussed the issue in a Wednesday note titled “Currency Wars in Reverse Got Markets in a Tizzy,” arguing that policy-makers now prefer strength because of the “inflationary impulse that has gripped markets over the past few quarters,” they wrote.
For 36 years, Visa has paid hundreds of millions of dollars to be an Olympic sponsor, ensuring its branding is all over stadiums and athletes, and that no one attending or watching the Games even thinks of Mastercard.
While U.S. equities saw positive returns during previous periods of rate increases, the key risk this time round is that the Federal Reserve will be “tightening into an overvalued market,” the strategists led by Savita Subramanian wrote in a note.
“The Fed is no longer on the dovish end of the spectrum, but it is not very hawkish relative to its G10 counterparts either,” wrote BofA Securities’ economics team over the weekend.
Two years after the pandemic sent the global economy into a deep but short recession, central bankers are withdrawing their emergency support -- and they’re moving faster than they or most investors had foreseen.
CBC - John Paul Tasker, Nick Boisvert (2022-02-03)
Candice Bergen was voted interim leader of the Conservatives on Wednesday evening after a majority of party MPs voted to remove Erin O'Toole as leader earlier in the day.
Macklem, speaking to the Senate banking committee, reiterated that interest rates would have to start going up this year to tackle inflation, which is currently 4.8 per cent, more than double the central bank’s 2 per cent target.
Britain must ditch plans to make regulators "cheerleaders" for global finance and instead focus on promoting financial inclusion at home, consumer campaign groups said on Friday.
The Bank of Canada’s maiden voyage into quantitative easing is coming to an end. Now we’re about to find out what the return trip – quantitative tightening – looks like.
The Governor of the Bank of Canada spent the best part of two years promising to keep interest rates as low as they could go, even in the face of surging inflation. This week, he blinked, declaring an end to the emergency phase of monetary policy, and putting Canadians on notice that borrowing costs are going up, and soon.
In 2016, the Bank of England took a stab at estimating the interest-rate equivalent of its bond-buying program: The thinking then was that 60 billion pounds ($80 billion) of asset purchases were comparable to a Bank Rate cut of about 50 basis points.
First, the obvious: The bank came right out and said that it plans to raise rates very soon – and that Wednesday’s announcement was, basically, clearing the tracks in preparation. This isn’t something central banks typically do. In this case, Bank of Canada Governor Tiff Macklem underlined the point in his post-announcement news conference. He wanted to make sure no one missed it. The bluntness had a certain “don’t say we didn’t warn you” feel to it.
Josh Nye, Senior Economist with RBC, talks with Financial Post’s Larysa Harapyn about the Bank of Canada’s decision to hold on interest rates, but signaled increases are coming.
Bloomberg - Erik Hertzberg and Theophilos Argitis (2022-01-27)
His own analysts presented him with evidence the economy is on the cusp of overheating and made a clear-cut economic case to hike immediately. But Macklem had told Canadians and investors they’d get a heads up before increasing rates. A move Wednesday could have been seen as a betrayal of that promise.
Instead of raising rates to cool inflation, Canada’s central bank raised its inflation forecast. The BoC CPI estimate reached 4.2% for 2022, which is a notable jump from the 3.4% previously expected. It’s also more than double the target rate of 2% they should have been working towards. The central bank recently found out most businesses no longer believe the BoC can control the monetary supply. This presents a significant concern when attracting investment to Canada.
Bloomberg - Jen Skerritt, Kim Chipman, and Allison Smith (2022-01-26)
Alberta Premier Jason Kenney said he’s working with U.S. governors to lobby President Joe Biden and Canadian Prime Minister Justin Trudeau for an end to trucker vaccine mandates that are disrupting shipments across the border.
The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ %, with the Bank Rate at ½ % and the deposit rate at ¼ %. With overall economic slack now absorbed, the Bank has removed its exceptional forward guidance on its policy interest rate. The Bank is continuing its reinvestment phase, keeping its overall holdings of Government of Canada bonds roughly constant.
If you’ve been in the market for a new refrigerator in recent weeks, you’re likely still suffering from sticker shock. Fridge prices were up almost 14 per cent in December, as Canada’s overall inflation rate hit a 30-year high of 4.8 per cent. Everything is suddenly costing more, from that fridge and the groceries you put in it (up 5.7 per cent) to a new car (7.2 per cent more) and the gas (33 per cent) it likely runs on. From home insurance (9.3 per cent) to shelter costs (5.4 per cent), Canadians are forking out more and more of their income just to cover the basics.
Thedéen said that European regulators should consider banning a mining method known as “proof of work” and instead nudge the industry towards the less energy-intensive “proof of stake” model to cut down on the sector’s vast power usage.
Bloomberg - Theophilos Argitis and Erik Hertzberg (2022-01-24)
As early as next week, the Bank of Canada will start a campaign of tighter monetary policy that will test the country’s debt-laden consumers and reveal whether its robust economic recovery has staying power.
The head of the Bank for International Settlements, Agustin Carstens, recently set out a dark vision for our financial future, quoting Goethe’s “Faust” and claiming that the “soul” of money was at stake.
Bloomberg - Alexander Weber and William Horobin (2022-01-20)
“We’re all in very different situations,” Lagarde told the France Inter radio station Thursday in an interview. Inflation is “clearly weaker” in the euro area, while the region’s economic recovery is also not as advanced as in the U.S., she said.
FT - Guy Chazan, Roman Olearchyk, James Politi (2022-01-20)
Ukraine’s president Volodymyr Zelensky has hit back at Joe Biden’s suggestion that a “minor incursion” by Russian forces into Ukraine might not prompt the severe response the west has threatened — a remark that has alarmed allies of the US.
After months of anticipation, the Fed on Thursday released a lengthy discussion paper that will serve as the basis of what is expected to be a heated and consequential debate at the heart of the central bank in the coming months — though it made clear it did not “favour any policy outcome” at this point.
A subsidiary question is: Does the government of a Confederation have the right, the legislative competence to declare the central industry of one of the provinces within that Confederation outmoded? And on that premise make it a national policy to destroy the economic well-being of that province?
In 2017, Joe Clark made an appearance in Atlanta alongside former U.S. President Jimmy Carter. It was a fitting meeting, as both men were cursed to spend the majority of their lives recovering from a brief and ultimately unsuccessful flirtation with absolute power. It’s now been 43 years since Clark’s nine-month stay in government — easily granting Clark Canadian history’s longest tenure as an ex-prime minister.
Canada’s central bank has been going Brrr, and it’s not because of the frigid winters in Ottawa. Bank of Canada (BoC) data shows that the money supply is still expanding rapidly in October. The M2++ money supply hit peak annual growth last year, reaching the highest level since the 1980s. The latest numbers show over 1 in 5 Canadian dollars today, didn’t exist prior to 2020. Traditionally the expansion of the money supply precedes inflation. That explains a lot.
Economists at TD Securities and Laurentian Bank said Monday the Bank of Canada will start a hiking cycle at its policy decision on Jan. 26. Bank of Montreal brought forward its call on the first increase to March from April, while Bank of Nova Scotia said the central bank “cannot afford” to wait any longer.
Canada’s central bank has been tight-lipped about its next moves. The Bank of Canada last told the public that April would be the earliest they’ll be raising rates. That was back when they said inflation was transitory though. Since then, the US has dismissed the transitory narrative and Canada’s central bank has been quiet.
Canada’s long-term economic growth and the stability of its financial system could be put at risk if the country delays implementing policies to deal with the transition to a low-carbon world, the central bank and the banking regulator say in a report analyzing a range of possible climate scenarios.
The Bank of Canada and the Office of the Superintendent of Financial Institutions examined the balance sheets of Royal Bank of Canada
RY-T+1.30%increase
, Toronto Dominion Bank TD-T+0.72%increase
and four large insurance companies to see how the institutions would be impacted by various policies aimed at achieving net-zero emissions.
Bloomberg - Payne Lubbers and Edward Bolingbroke (2022-01-14)
Traders have boosted expectations for the pace of central bank rate hikes in Canada even more than in the U.S., provoking questions about whether the market might have gone too far, too fast.
As the coronavirus pandemic rages on for a third year, Bloomberg’s Stephanie Flanders explains on “Quicktake Stock” why Covid-19 will take a back seat to central banks as a driver for global economies this year.
The Bank of Canada and the Office of the Superintendent of Financial Institutions (OSFI) completed their climate scenario analysis pilot in collaboration with six Canadian federally regulated financial institutions.
Bloomberg - Rich Miller and Craig Torres (2022-01-12)
Federal Reserve Chair Jerome Powell sought to reassure lawmakers and investors on Tuesday that the central bank can pull off the tricky task of bringing down four-decade high inflation without damaging the U.S. economy.
Jerome Powell faced the Senate Banking Committee at his confirmation hearing for a second term at the Federal Reserve on Tuesday, and it’s a sign of the progressive times that a leading issue was the greening of the central bank. Not green as in money, but as in climate regulation.
On Friday, January 14, 2022, the Bank of Canada and the Office of the Superintendent of Financial Institutions (OSFI) will publish the Final Report of the BoC-OSFI Climate Scenario Analysis Pilot.
Canada’s banking regulator could raise capital requirements for banks in the coming years to build up new buffers against risks from climate change and the challenging transition to a greener economy.
Peter Routledge, who leads the Office of the Superintendent of Financial Institutions (OSFI), said at a virtual conference held by Royal Bank of Canada on Wednesday that the regulator “will expect federally regulated financial institutions to build up their capital buffers in the 2020s.”
New capital buffers would be designed to guard against potentially higher volatility and risks to the financial sector as action to combat climate change ramps up, and especially if some of the tougher measures are put off past 2030.
After OSFI lifted those restrictions in November, with Mr. Routledge urging banks to “act responsibly” with their surplus capital, the six largest banks announced dividend increases of 10 per cent to 25 per cent, and plans to buy back 2 per cent to 3.5 per cent of their shares. And in late December, Bank of Montreal
Of all the recipients of Canadian government support in recent years, Petroleos Mexicanos (Pemex) ranks among the strangest. Export Development Canada, a Crown corporation, provided 19 loans to Mexico’s state-owned oil company over 15 years, totalling somewhere between $3-billion and $5.7-billion (EDC only discloses ranges, not precise amounts). The Indian Oil Company received somewhere between $190-million and $425-million. Petrobras, Brazil’s state-owned oil company, got at least $1-billion.
Federal Reserve officials said last month that the U.S. labour market was “very tight” and might need the U.S. central bank not just to raise interest rates sooner than expected but also reduce its overall asset holdings to tame high inflation, according to minutes of their Dec. 14-15 policy meeting.
In one briefing note from last January, officials warned Finance Minister Chrystia Freeland that the issuance of a central bank digital currency would entail “wide-reaching implications for the economy, the financial system” and the Bank of Canada’s operations.
The increase is part of a multi-year plan approved by provinces and the federal government five years ago to boost retirement benefits through the public plan by increasing contributions over time. The increases started in 2019.
In the case of CPP, maximum contributions by employees and employers will be $3,499.80 in 2022, up from $3,166. For self-employed Canadians, the maximum amount will be $6,999, up from $6,332.
Bank of Canada officials spent much of 2021 assuring people that this period of high inflation would be relatively short-lived. The shape of monetary policy next year could depend to a significant degree on whether Canadians continue to believe this narrative.
Reuters - Pete Schroeder and Michelle Price (2021-12-28)
Speculation over who will get the role is once again ramping up, after the Wall Street Journal on Tuesday reported that the White House was considering Sarah Bloom Raskin, a former Fed governor and former Treasury Department official, for the position.
The federal government deposited nearly $26 million into the wrong bank accounts during the last fiscal year — and more than $10 million of it may be gone for good.
Bloomberg - Shelly Hagan, Erik Hertzberg (2021-12-16)
Governor Tiff Macklem underscored that price stability is central to the Bank of Canada’s renewed mandate and indicated that any new flexibility will apply only at times when inflation is low or the economy is weak.
The Fed held rates but will double the speed it tapers its bond-buying, a sign easy credit will come to an end. The Fed will lower its Treasury purchases by another US$20 billion next month. Mortgage backed securities purchases will also fall by US$10 billion. At this pace, the program should be over by mid-March. Before this announcement, RBC didn’t see the program ending until mid-2022.
In November, 2020, Finance Minister Chrystia Freeland sidled past demands for a fiscal anchor, such as setting a target level for Canada’s debt burden, to limit the growth in the federal government’s spending and debt. Instead, she announced, the government would adopt “fiscal guardrails,” broader economic measures that would guide decisions on $100-billion of stimulus spending over three years.
Bloomberg - Steve Matthews and Sarina Yoo (2021-12-15)
More than half predict the Fed’s quarterly forecasts, released after the conclusion of its two-day meeting Wednesday, will show the median of 18 officials projecting two rate hikes next year from current levels near zero.
The Federal Open Market Committee (FOMC) is meeting this week, and its members were greeted Tuesday with the rude welcome of surging wholesale prices. This is more evidence that Chairman Jerome Powell and the Federal Reserve have made a historic mistake that they now have to fix without sending the economy into recession.
BMO chief economist Douglas Porter said, “mission accomplished” because they already hit full employment. His analysis shows prime-aged (15-64) workers’ employment rate is at a record high. The rate is “easily” past pre-pandemic levels. At the start of 2020, the Canadian economy was also considered robust. By no measure is this a weak employment market.
Investment Executive - Christopher Rugaber (2021-12-15)
On Wednesday, the Fed will likely announce that it will reduce its monthly bond purchases at twice the rate that Powell had outlined just six weeks ago. Those bond purchases are intended to lower longer-term rates, so winding them down more quickly — likely by early spring — will lessen some of the economic aid the Fed supplied after the pandemic erupted last year.
The renewal of the Bank of Canada’s mandate agreement with the federal government grants the central bank a five-year licence to, largely, continue doing what it has already been doing.
Michael Sabia spent decades helming major Canadian companies before the Liberal government recruited him to be deputy minister of the federal Department of Finance in late 2020. He accepted the job, he said at the time, in order to drive an economic-growth agenda in Ottawa.
The federal government has directed the Bank of Canada to put more emphasis on full employment as it aims to keep inflation low and stable. It is the most significant change to the central bank’s mandate in three decades, and reflects evolving ideas about the nature of the economy and monetary policy.
“The characterization of inflation as transitory — it’s probably the worst inflation call in the history of the Federal Reserve,” El-Erian said on CBS’s “Face the Nation” on Sunday.
RealVision - Office of the Comptroller of Currency (2021-12-13)
A wave of de-banking may be coming to crypto and fintech over the coming 12 months. Regulators conducted a series of interagency "policy sprints" focused on crypto assets. They recently issued a joint statement with a roadmap of the agencies' plans to clarify throughout 2022 whether certain activities are "legally permissible." Paul Atkins, CEO & Founder of Patomak Global Partners and former SEC Commissioner, joins Real Vision in this exclusive interview to break down what this letter could mean for the banking organizations. Interviewed by Maggie Lake on December 11, 2021. Check out the joint statement from the Federal Reserve, FDIC, and OCC here: https://bit.ly/3ytNTRF
Thank God for financial globalization, the Americans must be thinking. The Russian financial system is no longer an island, as it was in the Soviet era. But it can effectively be turned back into one, just like that – by flicking a switch.
Finance Minister Chrystia Freeland will announce the Bank of Canada’s new mandate on Monday in a long-awaited decision that is expected to keep the central bank’s inflation target at 2 per cent while adding new language about how it should factor in employment when setting interest rates.
Bank of Canada governor Tiff Macklem, like U.S. Fed chairman Jerome Powell, is clearly starting to view continuing high inflation with concern. A change is coming in monetary policy. With demand outrunning supply, our central banks’ policy interest rates need to rise – and may rise a lot.
Economists expect Finance Minister Chrystia Freeland to renew the Bank of Canada’s mandate of aiming its monetary policy at keeping inflation around 2 per cent, and to add new guidance to consider employment levels when it makes its decisions, but stop short of a dual mandate.
While reiterating that officials expect these constraints to eventually ease along with inflation next year, Gravelle emphasized there’s a lot of uncertainty around that outlook. In January, the central bank will reassess whether bottlenecks and shortages are impacting the economy’s ability to grow without fuelling inflation.
The Bank of Canada left monetary policy unchanged Wednesday in a stand-pat interest-rate decision that highlighted stubbornly high inflation and accelerating wage growth while pointing to economic uncertainty tied to the Omicron variant of COVID-19.
The poem isn’t overly critical of Good Guv’nor Macklem but doesn’t portray him as a man of the public. It starts with ignoring the issues they’re meant to prioritize, such as inflation and input costs. Then celebrates the gains stocks made due to “printing” and ignoring that the market sees rates this low as irresponsible. Circumstances that are a tragedy for the working and middle class, but great for the rich.
Canada’s central bank is holding rates, which shouldn’t have been a surprise. The BoC is keeping the 0.25% overnight rate and said they’ll continue executing its reinvestment plan. As of Nov 1, the BoC has promised to only buy Government of Canada (GoC) bonds to replace those rolling off its balance sheet. They said their holdings of GoC bonds are “roughly constant” this morning.
Consider the Bank of Canada, now caught in a trap of its own making. Its mandate, pending an imminent renewal, requires it to maintain inflation in a range around two per cent, but its “forward guidance,” issued incessantly for the past year, has promised to keep the overnight rate of interest at 0.25 per cent until the real economy has returned to “normal” — at a date that lately seems to have been creeping closer from its original value somewhere around the end of 2022. The Bank is stuck with two quantitative targets, one, an inflation target agreed with the government that is its ultimate policy goal, and the other, its own creation, its target for the overnight rate, which is its main policy instrument. And it doesn’t seem to have thought much about what to do if they proved incompatible, which they now have. So: how did the Bank get into this mess, and more important, how does it extract itself? We shouldn’t criticise the authorities for rapid resort to strong and unconventional stimulus when COVID-19 struck last March. To continue with “inflation targeting as usual” in those circumstances would have been a bit like sticking to the rules of the Gold Standard in the summer of 1914. Nor should we really complain that the stimulus turned out to be a bit excessive — better too much than too little under the circumstances, surely? The Bank’s fault, which it has shared to varying degrees with the Fed, the European Central Bank and the Bank of England, lay in failing to appreciate sufficiently the inflationary risk inherent in its measures, and even more so, in issuing its forward interest-rate guidance with an unwarranted degree of certainty.
“We believe globally coordinated efforts on climate risk management help financial institutions understand the consequences of climate change for their business, support their efforts to develop important climate risk management capabilities and capitalize on opportunities presented by climate change,” it said.
If you take your eyes off Canada’s rocket car of a labour market for a moment as it zooms up the recovery road, and look back far behind it, you’ll spot something petty important that it has left in its dust.
Finance Minister Chrystia Freeland has set Dec. 14 as the release date for a fall fiscal update, which will be the first formal revision of the federal government’s economic forecast since the April budget.
“The principal contributor to the decline in stock prices today is the Powell commentary, regarding the upcoming Fed meeting, about accelerating the tapering of their bond buying program, which obviously leads to the prospect that rate hikes come sooner next year,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.
“That somewhat hawkish shift in tone caught the market flatfooted,” Luschini said.
Bloomberg - Onur Ant and Asli Kandemir (2021-12-01)
The monetary authority said in a statement that it took action due to “unhealthy price formations” in the lira, which has been in freefall since President Recep Tayyip Erdogan renewed his push for lower interest rates.
Or maybe Ms. Freeland was hinting that the government’s renewal of the Bank of Canada’s five-year mandate – the underlying principles that the bank applies when deciding on interest rates – will be a lot more this time around than the usual rubber-stamping of another five years of the bank’s long-standing 2-per-cent inflation target. Perhaps Ms. Freeland is prepared to step into the debate about the central bank’s monetary policy-setting framework in a way that no Canadian government has in decades.
Program spending, excluding net actuarial losses, between April and September was $225 billion, a decline of about $83.9 billion, or 27.2% drop, from the $308.9 billion in the same period one year earlier.
Prime Minister Justin Trudeau’s government was criticized Thursday for its handling of Canadian-American relations in the wake of an announcement by the United States that it would double the rate of punitive duties on most softwood imports from Canada.
Mr. Trudeau was derided by Conservative Leader Erin O’Toole’s front bench on his grasp of the issues at stake for ordinary people, as deputy leader Candice Bergen challenged him to name the price of common goods such as bread and bacon and beans, and of surf boards – one of the Prime Minister’s favoured vacation activities.
Mexican President Andres Manuel Lopez Obrador's surprise shakeup of the nomination process for the Bank of Mexico's (Banxico) next chief has cast doubt over the bank's rate-tightening cycle as it battles to keep high inflation in check.
Although the word “exuberant” characterizes the housing markets in many Canadian cities & towns since the fall of 2020, we at OSFI believe residential mortgage credit risk has risen only modestly. There remains a risk that residential mortgage credit conditions could deteriorate, but fortunately OSFI has leveraged several prudential tools to increase the margin of safety in that market. In this endeavour, our federal and provincial financial safety-net peers have contributed mightily. Nevertheless, we consider the current imbalance between housing demand and supply to be a material prudential risk, and all actors in the Canadian housing system must take actions if we are to lessen the risk.
On Monday, November 29, and Tuesday, November 30, 2021, the Bank of Canada will host the inaugural Symposium on Indigenous Economies, a joint conference of the Bank of Canada, the Tulo Centre of Indigenous Economics and the Reserve Bank of New Zealand. It is the first in a series of bi-annual events examining the unique economic issues facing Indigenous peoples. The Symposium seeks to build cultural awareness and foster inclusion, strengthen engagement with Indigenous communities and support economic and financial education for and about Indigenous people.
The digital currency will be backed by bank deposits and use a shared platform to accelerate fund transfers and settlement between companies. While there will be a shared platform, a separate "business process area" will mean that the currency can be programmed to meet different business needs of the participants.
President Joe Biden announced Monday he’s nominating Jerome Powell for a second four-year term as Federal Reserve chair, endorsing Powell’s stewardship of the economy through a brutal pandemic recession in which the Fed’s ultralow rate policies helped bolster confidence and revitalize the job market.
Federal Reserve Chair Jerome Powell and Fed Governor Lael Brainard on Monday both noted the corrosive impact high inflation is having on the U.S. economy and American families in what may be a signal that controlling the rapid pace of price increases is now the central bank's top priority.
This is not as simple a matter as you might think. It depends on how deficits are dealt with in later years. When fiscal policy tightens, governments typically avoid raising taxes or cutting spending on the poor. If so, richer provinces like Alberta, Ontario and British Columbia will see a rise in transfers to other provinces. On the other hand, if the federal government splurges on policies that benefit the rich, such as electric cars or licensing restrictions, net transfers from wealthier provinces might well decline.
WSJ - Andrew Duehren and Richard Rubin (2021-11-19)
The House was set to pass a roughly $2 trillion education, healthcare and climate package Friday, as Democrats corralled their slim majority to approve the centerpiece of President Biden’s economic agenda after months of wrangling.
Through the first nine months of 2021, foreign investors bought $126.0-billion-worth of Canadian securities, up from $108.7 billion for the same period in 2020.
COVID-19 has accelerated risks, which require accelerated responses to those risks from institutions and regulators. Even before the onset of the pandemic economic pressures due to extended period of low interest rates, uncertain and volatile business conditions, and growing exposures to non-financial risks were shaping the future of the insurance sector.
OSFI - Superintendent Jamey Hubbs at the Canadian Regulatory Technology Association annual meeting (2021-11-18)
OSFI’s approach to digitalization is determined through our mandate. OSFI’s purpose as stated in the OSFI Act is “to ensure that financial institutions and pension plans are regulated by an office of the Government of Canada so as to contribute to public confidence in the Canadian financial system”. We see the potential to unlock greater value for Canadians who expect their regulators to temper, but not inhibit, innovations. Our approach is in finding that balance to foster financial stability and contribute to Canadians confidence in their financial system.
JPMorgan Chase & Co. economists said they now expect the U.S. Federal Reserve to raise interest rates next September, becoming the latest on Wall Street to jettison a forecast for the central bank to stay on hold through 2022.
The Bank of Canada is grappling with labour market uncertainty as it tries to gauge the health of Canada’s economic recovery and estimate a timeline for interest rate hikes in the face of surging inflation, deputy governor Lawrence Schembri said Tuesday.
COP26, supposedly humanity’s “last best chance,” struggled to yield even faint hope of keeping temperatures from rising 2 C, let alone 1.5 C. Even so, egged on by catastrophists and the mainstream media, Canadian politicians are adopting increasingly damaging climate policies. Should we be surprised that Canada’s delegation to COP26 was the world’s largest? Surprised, not so much. Appalled, definitely.
Reuters - Andy Bruce and William Schomberg (2021-11-17)
British inflation surged to a 10-year high last month as household energy bills rocketed, according to data on Wednesday that will bolster expectations that the Bank of England will raise interest rates next month.
Canada’s major banks are expecting larger tax bills in 2022 as a new surcharge on financial institutions’ profits over $1-billion could be pushed through by Ottawa as soon as the start of 2022.
Avery Shenfeld, chief economist at the Canadian Imperial Bank of Commerce, said Friday that he expects to see new language around the idea that achieving the central bank’s two per cent inflation target sustainably requires an economy near full employment.
President Joe Biden is still weighing whether to keep Jerome Powell as chair of the Federal Reserve for a second term or elevate Fed Governor Lael Brainard to the post, an administration official said on Wednesday.
The inflation target renewal, done jointly with the federal government every five years, is due by year-end and comes at a time when central banks around the world are grappling with how to manage an uneven rebound from the COVID-19 pandemic.
Bank of Canada Governor Tiff Macklem has reiterated that Bitcoin cannot be classified as a currency because it lacks attributes to be used in transactions.
“But if inflation continues to surprise to the upside and hiring proves sluggish, expect the Fed to field more questions about whether it can continue to hold rates low until maximum employment is achieved,” the bank added.
Peter Routledge, head of the Office of the Superintendent of Financial Institutions, said Thursday that the measures “are no longer necessary” and that decisions about capital distribution belong with boards of directors and management of the financial institutions.
After reductions in November and December, “the committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook,” the U.S. central bank’s policy-setting Federal Open Market Committee said in a statement Wednesday following a two-day meeting.
The RBA said it would stop using yield caps and abandoned a view that its benchmark interest rate won’t rise until 2024, joining other central banks that are tightening policy as inflation risks mount.
The bank’s economists are calling a very sharp climb for Canadian interest rates. They have forecast an increase of 100 basis points (bps) in the second half of 2022. It would be followed by another increase of 100 bps in 2023. An overnight rate of 2.25% would be the highest Canadians have seen since 2008.
The federal government ran a deficit of more than $57 billion over the first five months of its fiscal year, about $114 billion less than the treasury pumped out during the same stretch one year earlier.
Should tax cheats with unreported income pay their fair share of federal income taxes? That’s what’s at stake in the congressional tax compliance proposal that would reel in tax cheats by tracking bank account transfers. The proposal has riled industry players and stoked misinformation campaigns. Amid this backdrop, the Treasury Department issued a fact sheet today with details on a revised proposal to catch wealthy tax cheats, this time setting the bank account threshold at $10,000, up from $600, and providing an exemption for wage earners.
Over the last several days, we’ve seen the Outrage Machine in action over a new Treasury proposal to require banks to report to the IRS new information on U.S. bank accounts, in addition to the existing reporting of interest payments. This proposal, as described at CBS News (among, of course, many other sites) would require banks to report the gross annual inflows and outflows in bank accounts, ostensibly to catch high-income tax-dodgers. Because the threshold for reporting was set at $600, skeptics are, well, skeptical of the assertion that this change would only affect, as the Biden administration claims, those earning over $400,000 per year.
"The main forces pushing up prices — higher energy prices and pandemic-related supply bottlenecks — now appear to be stronger and more persistent than expected," the bank said, adding that it now thinks Canada's multi-year high inflation rate will go higher still — topping out at about five per cent, the bank said — before coming back down to the range of about two per cent next year.
Chrystia Freeland remains as deputy prime minister and minister of finance. Randy Boissonnault, one of two Liberal Alberta MPs, has been named associate minister of finance as well as minister of tourism.
Mona Fortier, who previously held the associate minister of finance role, will be president of the Treasury Board.
Governor Tiff Macklem is expected to reduce weekly government bond purchases by one half on Wednesday to $1 billion (US$809 million). That will mark the fourth time over the past 12 months the central bank has rolled back a program that has poured hundreds of billions into the financial system since the start of the COVID-19 pandemic.
The leaders of most of the world's biggest greenhouse gas emitters gather in Glasgow from Sunday, aiming to thrash out plans and funds to tilt the planet towards clean energy. But the man running the biggest of them all likely won't be there.
Earlier this month, a prominent U.S. economic think tank invited the Atlanta regional Federal Reserve president to deliver a speech on the outlook for inflation. He showed up with his Transitory Jar.
Bank of Canada Governor Tiff Macklem has one objective: managing inflation, which the central bank defines as keeping the Consumer Price Index (CPI) advancing at an annual rate of about two per cent.
Robert Fay is the managing director of digital economy at the Centre for International Governance Innovation. David Dodge is a former governor of the Bank of Canada and is senior adviser at Bennett Jones LLP.
G&M - HOWARD SCHNEIDER AND ANN SAPHIR (2021-10-21)
The U.S. Federal Reserve on Thursday banned individual stock purchases by its top officials and unveiled a broad set of other restrictions on their investing activities, taking action roughly six weeks after reports of active trading by some U.S. central bank policy makers triggered an ethics uproar.
“We haven’t made a decision to issue one yet because we basically don’t see a compelling need under current circumstances,” Bank of Canada Deputy Governor Timothy Lane told a virtual panel organized by a Washington think-tank.
WSJ - Ben Eisen and Christine Mai-Duc (2021-10-20)
Bank of America Corp. thought helping states such as California hand out unemployment benefits would be good business. Then millions of Americans lost their jobs at once.
With all the subtlety of a dropped hammer, Bank of England Governor Andrew Bailey dispelled what little doubt was left that U.K. interest rates would be raised before the end of this year. The central bank would “have to act” to reduce inflationary pressures, he declared at an online panel held on Sunday by the Group of 30, an organization of financiers and academics. The whole gilt yield curve shifted higher Monday in reaction, with two-year yields at 0.75%, the highest since May 2019; 10-year yields have doubled over the past two months, making it the worst-performing major government bond market. U.K. money markets have priced in 50 basis points of rate hikes by year-end. It is overreaction, of course. But what else could the markets do as they bore witness to the previously super-dovish BOE’s road-to-Damascus conversion? The central bank had just until recently toyed with negative rates. In the minds of most BOE policymakers, the debate whether inflation is transitory is over. Bailey’s remark makes clear that inflation is now flashing red because energy prices have soared, and those surges are expected to spill over into consumer behavior, business pricing and, ultimately, potential wage demands. The semantics of inflation is for the birds — and they are turning out to be hawks.
“If successfully implemented, the global minimum corporate tax rate will be mildly credit negative for sovereigns that have used tax policy as a key component of a broader competitiveness strategy to attract investment, such as Ireland, Hungary, and many Caribbean economies, which typically have corporate tax rates below 15%,” Moody’s said.
Bets in the overnight swaps market are increasingly tilting toward a move early next year, well ahead of the U.S. Federal Reserve. Traders have now priced in three hikes in Canada by the end of 2022, which would bring the policy rate to 1 per cent from the current 0.25 per cent.
Democrats concerned by the tight race for Virginia governor are rushing to bolster Terry McAuliffe’s campaign in a state that could set the national momentum for the critical midterms and the 2024 presidential election.
Bank of Canada Governor Tiff Macklem is standing by his assertion that the current bout of high inflation is transitory, even as top Canadian bank executives question that narrative and warn that price pressures could persist.
At the time, her bosses at Finance as well as her former professors thought they had cracked the code by promoting a policy mix that emphasized free markets over government intervention. It came to define mainstream policy-making and was even given a name: the Washington Consensus, so called because the International Monetary Fund and the World Bank — both based in Washington, D.C. — were by then making loans contingent on spending discipline, market-determined exchange rates and the like. “The Washington Consensus emerged at a time when it felt like market forces could deliver a lot of what we wanted, and if we focused on that, the benefits of increased growth, increased productivity, would be distributed to people in different income brackets and across different cultural groups,” Wilkins said in an interview on Oct. 13. “History has proved us wrong in that regard.”
Does the G20 even still meet? Maybe no one cares, but we probably should. Canada does better when the world’s bullies agree to down swords and respect a common set of rules and norms. Think back to 2008 and 2009. A smallish country’s banking system, apparently the soundest in the world, was still at the mercy of whatever shenanigans they were getting up to in the world’s major financial centres. Canada has never really had the economic clout necessary to make people take notice, and it’s been a long time since we spent enough on the military to be of much help on security matters. But Ottawa has a tradition of sending technocrats out into the world to help keep the international conversation going, contributing ideas and/or time to efforts that have little direct connection to their day jobs.
Reuters - Susan Cornwell and Richard Cowan (2021-10-13)
The Democratic-controlled U.S. House of Representatives gave final approval on Tuesday to legislation temporarily raising the government's borrowing limit to $28.9 trillion, pushing off the deadline for debt default only until December.
After years of missed deadlines and wrangling over how to handle global tech firms such as Facebook Inc. and Alphabet Inc.’s Google, Friday’s deal included a 15 per cent minimum rate for corporations and the main parameters of how much profits of multinationals would be taxed in more countries: 25 per cent of profits over a 10 per cent margin.
President-elect Joe Biden chose former Federal Reserve Chair Janet Yellen to lead the U.S. Department of the Treasury for her gravitas, quiet consensus building, and attention to data—qualities that served her well during a decades-long central banking career. Democrats and Republicans alike laud her judgment.
For FRFIs, OSFI agrees guidance on climate-related risks should be principles-based and consider the Canadian context as well as international developments. Furthermore, any such guidance would be best informed by results from the Bank of Canada-OSFI joint pilot project on climate risk scenarios, for which stakeholders can expect further communication later this year. Taking these factors into account, OSFI expects to communicate next steps on its climate-related policy work early next year.
Bank of Canada governor Tiff Macklem says high inflation could be “a little more persistent” than the central bank previously thought, while the economic recovery could take longer than expected.
Some politicians think they've found a silver bullet for the impasse over the debt limit, except the bullet is made of platinum: Mint a $1 trillion coin, token of all tokens, and use it to flood the treasury with cash and drive Republicans crazy.
Cities such as Toronto suffered a fiscal blow after the pandemic forced them to lock down, crimping revenue from local sources such as transit and parking. But federal and provincial governments stepped in with billions in aid, strengthening the “implicit guarantee” on Canadian municipal debt, said Hooper, a senior portfolio manager with the Atlanta-based firm.
The move escalates a dispute in which U.S. President Joe Biden’s administration has been reluctant to intervene. Last May, U.S. Secretary of Energy Jennifer Granholm told reporters the White House had no plans to get involved, saying it would be up to the courts to settle.
The US government is hurtling towards an unprecedented debt default in roughly two weeks’ time if lawmakers do not act to raise the federal limit on borrowing and enable the Treasury department to pay government commitments already approved by Congress.
The searches soon to get underway for two new top U.S. central bankers will be an important test for what has been a rallying cry of sorts for proponents of diversity: that boards matter.
No longer are central bankers seeking to do whatever they can to ensure money is available for households, companies and governments to borrow at exceptionally favourable rates. Along with Norway’s monetary tightening, the first in any advanced economy since the pandemic began, four emerging economy central banks — Pakistan, Hungary, Paraguay and Brazil — also raised the cost of borrowing this week, while the U.S. Federal Reserve and Bank of England both signalled a move towards tightening monetary policy. These guardians of monetary policy are generally satisfied that the economic recovery has proved stronger than they feared at the start of the year. But they are beginning to worry that money might become too cheap for too long. That would threaten rising inflation, excess borrowing and even financial instability as the world emerges from the coronavirus crisis.
A Chinese state-owned enterprise struck a deal to buy most of China Evergrande Group ’s stake in a commercial bank for $1.5 billion, the latest sign that the country’s authorities are trying to help the property giant resolve some of its financial troubles.
The regulator is working with the Bank of Canada and the private sector to better understand the risks that the transition will bring, and is also consulting widely on how to identify, measure and respond to climate-related risks, with more requirements coming, he said.
“They want to go later. They want to ensure the self-sustaining recovery takes shape and that the output gap closes,” Mulraine said during a panel discussion at the Bloomberg Canadian Fixed Income Conference on Tuesday. “They will go on or just after the output gap closes.”
OSFI’s mandate says nothing about climate, but it does make us responsible for contributing to public confidence in Canada’s financial system. Getting to net zero by 2050 will mean Canada’s economy will have to adjust. Canada’s financial system will be a critical enabler to that adjustment and OSFI has an obligation to ensure that FRFIs and federally regulated pension plans (FRPPs) are fit to manage the risks that will accompany that adjustment.
Reuters - Richard Cowan and David Morgan (2021-09-28)
A sharply divided U.S. Senate failed on Monday to advance a measure to suspend the federal debt ceiling and avoid a partial government shutdown, as Republican lawmakers denied the bill the votes necessary to move forward.
Reuters - David Lawder and Andrea Shalal (2021-09-28)
The top Democrat and Republican on the U.S. Senate Foreign Relations Committee have urged President Joe Biden to "ensure full accountability" over a World Bank data-rigging controversy that has embroiled International Monetary Fund chief Kristalina Georgieva.
As an organization, OSFI is dedicated to increasing Indigenous representation. In addition to facilitating underrepresented groups, including Indigenous peoples, to apply for positions, we are expanding our reach to more areas of the country where members of those groups reside. We are also supporting our managers to familiarize themselves with the benefits of employment equity hiring and to increase diversity on their selection boards and teams.
"Tomorrow, September 27, we will begin debate on the Bipartisan Infrastructure Framework on the Floor of the House and vote on it on Thursday, September 30, the day on which the surface transportation authorization expires," Pelosi said in a letter to her fellow Democrats released by her office.
Central banks were the first economic responders to the Covid-19 pandemic. From Washington to Wellington, policy makers swiftly deployed tools developed during the global financial crisis and found new ways to shore up credit markets vital to the functioning of modern commerce.
Friday’s fiscal monitor says the deficit to date now reflects current economic challenges caused by Covid-19, including ongoing public health restrictions.
British finance minister Rishi Sunak has ordered two immediate reviews of the country's financial regulation related to the collapse of supply chain finance firm Greensill Capital.
That refers to the policy gathering on Nov. 2-3, though he left the door open to waiting longer if needed and stressed that tapering was not meant to be a direct signal on the timing of rate liftoff.
The Federal Reserve is expected to clear the way on Wednesday for reductions to its monthly asset purchases later this year and show in updated projections whether higher-than-expected inflation or a resurgent coronavirus pandemic is weighing more on the economic outlook.
U.S. Federal Reserve officials will lay bare how soon and how often they think the economy will need interest rates rises over the next three years when they release new forecasts at their policy meeting on Wednesday, with investors on alert for a faster pace of tightening.
CADUSD-0.18%decrease
edged higher against its U.S. counterpart on Friday as the central bank of top commodity consumer China moved to calm markets, while Canada’s 10-year yield climbed to a five-week high.
U.S. Treasury Secretary Janet Yellen issued a fresh plea for Congress to raise the federal debt ceiling on Sunday, arguing a default on U.S. debt would trigger a historic financial crisis.
With Canadians set to vote Monday in a highly competitive election, the outlook for the two largest sectors in country’s stock index hangs in the balance.
Polls say the race is close. If Prime Minister Justin Trudeau wins, as now looks likely, he may follow through on a promise to increase taxes on the biggest banks and insurance companies and impose stricter emissions rules on oil and gas companies. Financial and energy stocks make up 44% of the benchmark S&P/TSX Composite Index.
U.S. banking regulators are working on new climate risk management guidance for large lenders, a top official said on Wednesday, in another sign of efforts to incorporate the risks posed by rising temperatures into financial rules.
Foreign investors are growing more worried that Canada's federal election on Monday could result in a deadlock that hampers Ottawa's response to the COVID-19 pandemic and further slows the economic recovery from the crisis.
The Democratic architects of a key overhaul of U.S. financial regulation a decade ago called on President Joe Biden to reappoint Fed Chair Jerome Powell to a second term, rebuffing arguments he has been weak on regulatory issues.
After years of shock-and-awe stimulus, the Bank of Japan is quietly rolling back radical policies introduced by its bold chief Haruhiko Kuroda and pioneering controversial new measures that blur the lines between central banking and politics.
The U.S. Treasury Department met with a number of industry participants this week to quiz them about the risks and benefits posed by stablecoins -- a rapidly growing type of cryptocurrencies, the value of which is pegged to traditional currencies, according to three people with direct knowledge of the meetings.
The group discussed the rapid growth of stablecoins, which are cryptocurrencies that attempt to peg their values to a conventional currency, like the U.S. dollar, according to the Treasury. Regulators discussed their potential uses, as well as risks to end users and the financial system.
Bank of Canada Governor Tiff Macklem has provided the clearest picture yet on how the central bank plans to reduce monetary stimulus, saying it expects to start raising interest rates before entirely winding down its bond buying program.
The Conservatives are promising to balance the federal budget within 10 years without spending cuts or tax increases, even as they add tens of billions of dollars in new spending on top of the 2021 budget.
The message from Canada’s central bankers was that “even though the recovery lost a bit of steam in the second quarter, the ingredients are there for economic activity to strengthen through the remainder of the year,” Sri Thanabalasingam, an economist at Toronto-Dominion Bank, said in a note to clients. “While the Delta variant could complicate matters, the bank, like us, do not expect the virus to blow the recovery off course in the fourth quarter.”
The Bank of Canada has returned from an eventful summer with a tricky job on its hands: how to communicate vital information while keeping your mouth shut.
As expected, governor Tiff Macklem and his deputies opted to leave the current level of stimulus unchanged at the end of their latest round of interest-rate deliberations on Sept. 8. The election raised the bar for a shift in policy, as Macklem would only risk becoming a campaign issue if economic conditions demanded it. They didn’t, allowing the governor to turn the central bank’s latest interest-rate decision into a non-event.
Remember, this isn’t just low rates. They’re flooding the system with credit to push the cost of goods higher. Delaying a taper would mean adding billions more in credit stimulus for longer.
The Bank of Canada will likely tread carefully this week, mutedly acknowledging a weaker-than-expected economy in the midst of a heated election campaign.
The Bank of Canada is widely expected to hold the line on monetary policy this week after a series of economic releases showed weaker-than-expected growth even as inflation hit a decade-high.
Just 160 businesses filed for insolvency in July, marking a 35-year low in new filings, according to new data from the Office for the Superintendent of Bankruptcy. The record low, which represented a 28.3 per cent decrease in filings from the month prior, is largely due to the federal government’s pandemic wage and rent subsidies and other business support programs such as the Canada Emergency Business Account, which have been extended until October.
The platform estimates the federal deficit will decline from $156.9-billion this year to $32-billion in 2025-26, but offers no timeline for erasing it entirely. Those annual deficits would be $14-billion higher per year on average than the pre-election forecast the Parliamentary Budget Officer released in August.
State-backed firms are set to take a sizeable stake in a key Ant Group asset for the first time, three people told Reuters, in a move that will loosen the Chinese fintech giant's grip on a data treasure trove of over 1 billion users but help revive its IPO.
Nixon unhitched the U.S. dollar from the value of gold. The move changed the global monetary system almost overnight. The eventual result was the floating international exchange rates we still use today. The worldwide economy had expanded greatly and U.S. dollar use was widespread. It was good to have the global currency, but there were four times as many dollars in circulation as the U.S. had in gold reserves to back them up. This Bretton Woods exchange rate system, named after the New Hampshire town where it was hammered out after the Second World War, was running out of steam.
A prominent bank economist hurled criticism at Canada’s statistics agency after it revised its economic figures for April and May with little explanation, giving Prime Minister Justin Trudeau’s political opponents an opening to criticize his record.
Cleveland Federal Reserve Bank President Loretta Mester said on Monday that the U.S. economy is recovering strongly but she is not yet convinced that recent inflation readings will be enough to satisfy the price stability goal the U.S. central bank revamped a year ago.
Prime Minister Justin Trudeau of Canada would reject claims that his leadership style is similar to that of former U.S. President Donald Trump or British Prime Minister Boris Johnson. But in at least in one respect the comparison is getting closer to hitting its target.
The Federal Reserve will start dialing back its ultra-low-rate policies this year as long as hiring continues to improve, Chair Jerome Powell said Friday, signaling the beginning of the end of the Fed's extraordinary response to the pandemic recession.
While the financial world waits for the Federal Reserve to start reversing its ultra-loose policy stance, recent moves by a clutch of other central banks signal the days of pandemic-era accommodation are already numbered even as COVID-19 continues to impede smooth economic recoveries around the world.
At a campaign stop in Vancouver, the leader of the governing Liberals promised to hike the corporate income tax rate by three percentage points on profit over $1 billion (US$793 million) at financial institutions. The measures, which would bring the rate to 18 per cent from 15 per cent currently, are expected to generate $2.5 billion for government coffers over the next four years, starting in 2022-3, according to a party news release.
Goldman Sachs economists have raised the odds that the U.S. Federal Reserve will announce the start of tapering its bonds purchases in November, predicting the central bank will likely opt to dial back purchases by US$15-billion then and at meetings that follow.
FP - Christopher Condon, Steven T. Dennis and Saleha Mohsin (2021-08-25)
Powell has worked Congress during his three years at the helm like no Fed chair since Alan Greenspan. But where Greenspan was a regular of the cocktail party circuit, Powell has taken a more workmanlike approach.
A think tank highly critical of Federal Reserve chair Jerome Powell’s record on banking regulation released an assessment of his four-year tenure on Monday that is by turns scathing and complementary, highlighting the competing considerations as U.S. President Joe Biden weighs whether to reappoint him.
Bloomberg - Ott Ummelas and Niclas Rolander (2021-08-23)
The resignation of Sweden’s Stefan Lofven brings the largest Nordic economy a step closer to its first-ever female prime minister, and with it the task of fixing an ailing political system.
Central bankers and journalists will assemble for the virtual Jackson Hole conference later this week. Their agenda will be broad. The future path of quantitative easing, the health of the labor market, and other critical monetary and regulatory matters will command center stage. But we can also expect pronouncements on issues once considered the domain of elected politicians, including climate change, racial justice and inequality.
Reuters - Alun John and Scott Murdoch (2021-08-20)
Global banks and other financial institutions in Hong Kong are scrambling to find out details of China's planned imposition of an anti-sanctions law on the city, and trying to understand how it could impact their operations in the financial hub.
The Afghani fell as much as 1.7 per cent on Tuesday to 83.5013 per dollar, a fourth day of decline, according to data compiled by Bloomberg. The central bank was told there would be no more dollar shipments on Friday, which curtailed its ability to supply currency and led to more panic, acting Governor Ajmal Ahmady wrote in a Twitter thread.
G&M - LAILA BASSAM AND NAFISA ELTAHIR (2021-08-16)
Lebanon’s central bank governor said nobody was running the country, hitting back after government criticism of his decision to halt fuel subsidies that have drained currency reserves.
Justin Trudeau has triggered a long-expected snap election, seeking to gain a majority on the strength of his Liberal government’s record in managing COVID-19 – but opposition parties are casting the campaign as unnecessary and a blatant attempt at a power grab amid the fourth wave of the pandemic.
Prime Minister Justin Trudeau is expected to trigger an election on Sunday by asking Gov. Gen. Mary Simon to dissolve Parliament even though Canada’s top doctor says the country is now in the grips of a fourth wave of COVID-19.
“When OSFI introduced this special treatment of leverage ratio exposure measures in the spring of 2020, it was the appropriate response at the time to the uncertainty created by the pandemic,” said Ben Gully, OSFI’s assistant superintendent, regulation sector, in a statement.
Conservative Leader Erin O’Toole pitches his position on free trade as a stand against the failed policies of the Liberal government. In reality, his battle is with the ghosts of his own party.
The very existence of the debt ceiling is utterly superfluous. Every couple of years members of Congress have to vote to allow borrowing to fund measures that they’ve already approved through individual spending bills.
Its main function is political: Whichever party isn’t in power at the time uses it to try to either extract something from, or embarrass, the other side. On top of that, the limit isn’t really the limit. By invoking the vague catchall of “extraordinary measures,” Uncle Sam can keep on borrowing even after it’s hit the cap—or when the limit has been reinstated following a suspension, as was the case at the end of last month. Given that the alternative is either what’s known as a technical default or a seizing up of everyday government spending, that’s a good thing, even if you’re a fiscal hawk, which is an endangered species these days.
Leah Anderson is taking over as interim head of the Canada Deposit Insurance Corporation (CDIC) after Peter Routledge left the post to lead the Office of the Superintendent of Financial Institutions (OSFI).
The U.S. summary – which in Canadian law is presumed to be reliable – is missing a key word: “Huawei’s engagement with Skycom is normal business co-operation.” The word “controllable” does not appear.
The U.S. Treasury Department’s anti-money-laundering unit is undergoing its second leadership change this year, as current acting director Michael Mosier prepares to leave at the end of the week.
The sitting head of the central bank made the unusual move of writing an opinion column. Instead of using fancy data points, he whipped out a pen and provided no evidence to explain the current inflation environment. It wasn’t his first time either, with economists previously asking him to provide any evidence for the statements he’s made.
Bloomberg - Kevin Orland and Paula Sambo (2021-08-04)
Canada’s securities regulators plan to merge two industry groups that oversee financial advisers into a single organization, a move intended to address years of complaints about the overlapping roles and higher costs of the groups.
Central bankers should let inflation run temporarily above target when the economy is coming out of a severe recession, according to new Bank of Canada research that provides a window into how the central bank is thinking about inflation as the pandemic wanes.
In June, the bank assumed responsibility for monitoring online payment systems, such as digital wallets, run by fintech andpaytech companies. The new system will see the bank maintain a registry of retail payment providers in Canada, and monitor the strength of their risk-management protocols.
Reuters - David RandallGertrude Chavez-dreyfuss (2021-07-29)
Investors looking for clear guidelines on when the Federal Reserve will begin tapering its massive bond purchases were left waiting Wednesday, with all eyes next on the annual Jackson Hole conference of central bankers in August.
Today, the Office of the Superintendent of Financial Institutions (OSFI) issued the final version of Guideline E-4 Foreign Entities Operating in Canada on a Branch Basis. This guideline replaces existing guidelines E-4A Role of the Chief Agent and Record Keeping Requirements and E-4B Role of the Principal Officer and Record Keeping Requirements.
Central bankers should let inflation run temporarily above target when the economy is coming out of a severe recession, according to new Bank of Canada research that provides a window into how the central bank is thinking about inflation as the pandemic wanes.
The province of Ontario broke the record for a Canadian dollar green bond sale, raising C$2.75 billion ($2.19 billion) on Tuesday to fund a train line expansion among other purposes.
The combination has pushed global inflation readings higher. Canada’s consumer price index (CPI) is currently reading 3.6% higher than a year before. US CPI came in even higher, showing annual growth of 5.4% at the last measure. This is the highest rate both countries have experienced in a very long time. Naturally, people are starting to worry about how high this can get over the next few years.
U.S. Treasury Secretary Janet Yellen urged lawmakers on Friday to increase or suspend the nation's debt limit as soon as possible and warned that if Congress does not act by Aug. 2 the Treasury Department would need to take "extraordinary measures" to prevent a U.S. default.
The Bank of Canada has appointed long-time central banker Sharon Kozicki to the position of deputy governor – the second change to the bank’s governing council this month.
The Bank of Canada’s strongest argument against the current concerns of rising inflation is the big hole in employment left by COVID-19. But what if that hole suddenly filled in?
Two top Bank of England officials surprised investors this week by saying the time might be nearing for the British central bank to rein in the huge stimulus programme it has used to steer the economy through the coronavirus crisis.
G&M - JASON CLEMENS, MILAGROS PALACIOS AND NIELS VELDHUIS (2021-07-16)
One of the differences between being on the opposition and government benches is that the government must be held accountable for actual performance. The evidence is quite clear that the Trudeau government has increased taxes, has overseen a marked increase in government indebtedness and recorded comparatively weak economic growth. Rhetoric can’t change that reality.
It’s imperative Canadians distinguish between convenient political rhetoric and reality when it comes to the country’s finances, particularly as we approach a potential fall election. The Trudeau government continues to promulgate three assertions that must be clarified.
The Canadian dollar has been losing ground over the past two months, but don’t pin the blame on softer commodity prices, shifting Bank of Canada monetary policies or general risk aversion among global investors.
The Governing Council also discussed the amount of slack in the economy and the outlook for potential growth. Estimates of these measures have always been imprecise but are especially difficult given the rapid changes wrought by the pandemic. In the projection, economic slack is absorbed in the second half of 2022. To help manage the uncertainty surrounding this assessment, we will be watching a broader spectrum of indicators of slack, including a range of labour market measures.
The central bank cut its government bond purchases to a target of $2-billion a week, from $3-billion, further reducing the stimulus put in place early in the COVID-19 pandemic. It held its policy rate at 0.25 per cent and reaffirmed it does not expect to raise interest rates before the second half of 2022 at the earliest.
Yeah, that’s not a typo. Billion, with a B. Per week. Today the BoC announced their widely expected move to trim their QE program. The rate of QE will be slowed to $2 billion per week, down from the $3 billion prior. The program had been cut earlier this year as well, down from $4 billion per week. The program’s size was just reduced by a third, and it’s half as much as it was earlier this year.
The recent positive Canadian data, on top of several months of higher-than-expected inflation, should give the central bank conviction to move ahead with another cut to its weekly federal government bond-buying program, known as quantitative easing, analysts argued. The consensus view among economists is for the bank to reduce its pace of QE purchases – which are designed to hold down interest rates and encourage borrowing – to $2-billion a week from $3-billion.
“There is no doubt that we have willingly chosen to forgo some profitable business that our competitors would find appealing,” then-chief executive Evan Siddall wrote in August, in a letter to Canada’s biggest lenders, following the implementation of the stricter standards. Siddall used the letter to caution the banks and others mortgage lenders about risky lending, warning that “there is a dark economic underbelly to this business that I want to expose.”
Collapsed finance group Greensill Capital paid a salary of more than $1 million a year to former British Prime Minister David Cameron, the Financial Times reported on Monday, citing people familiar with the matter.
A hike from the US would allow the BoC to hike, with much less pressure on currency exchange. If Canada hiked alone, it would slow credit growth and inflation, but may also impact exports. If both countries do it at the same time, the loonie’s increase against the US dollar would be minimal. That gives the BoC a little more room to make the next increase more comfortable… or hike even more if needed.
The Canada Infrastructure Bank is refusing to disclose bonuses paid to executives despite a unanimous vote by MPs on a House of Commons committee calling for the amounts to be revealed.
The June meeting marked a turn in the central bank’s comfort with inflation risks amid heightened price pressures as the economy reopens from the pandemic, buoyed by massive monetary and fiscal-policy support. Officials also continued monthly purchases of US$80 billion of Treasuries and US$40 billion of mortgage-backed securities until “substantial further progress’ was made on inflation and employment.
Canada’s third-largest province will run a deficit this fiscal year that’s “significantly larger” than expected when the pandemic began, which will likely lengthen the time to return to fiscal balance, S&P said in a statement Wednesday explaining the one-notch downgrade to AA+. The move comes less than two weeks after Fitch Ratings took a parallel rating action.
It’s okay to admit it. After all, five big U.S. banks are increasing their dividends, and some are also planning to buy back their shares, moves that will handsomely reward their investors as the economy recovers from the pandemic.
Some 130 countries have agreed on a global minimum tax backed by U.S. President Joe Biden as part of a worldwide effort to keep multinational firms from dodging taxes by shifting their profits to countries with low rates.
Remember that time the head of Canada’s central bank said the housing bubble was good for the economy? Soak it up, because that may be the last time it ever happens. The Bank of Canada (BoC) finished its technical report on the Terms-of-Trade Economic Model (ToTEM). The model, which is used by the BoC as their primary forecasting tool, has now entered its third update in 15 years.
After years of negotiations, the United States, Canada and 128other countries have announced a new global pact to overhaul the way large multinational companies are taxed.
Dozens of monetary authorities around the world are contemplating launching central bank digital currencies (CBDCs), largely in response to the proliferation of cryptocurrencies and private digital currencies backed by large technology companies, such as Facebook Inc.
British Columbia has lost a triple-A credit rating, with Fitch Ratings Inc. downgrading the province in part because of Canada’s rising federal debt burden.
Several of the most senior officials in the federal Finance Department are leaving government – or have already left – after playing key roles in shaping Ottawa’s massive policy response to the COVID-19 pandemic.
Central banks are bracing for a showdown with purveyors of cryptocurrencies and other private forms of money. To help win that battle, they are counting on a still murky concept known as central bank digital currencies, or CBDCs.
For several hundred years, the people living on the Pacific island of Yap used giant rocks as a basic form of money. The most valuable of these massive limestone rings, called rai stones, weighed several thousand kilograms. As a result, they weren’t easily exchanged when an item was bought or sold. Boulders that were too big to roll from one owner to the next were left in a permanent resting place.
The federal government has named Peter Routledge as the head of Canada’s banking regulator, choosing a former financial analyst and federal policy adviser with a keen understanding of the financial system’s intricacies who also has recent experience running a federal agency.
Mr. Routledge will take the helm of the Office of the Superintendent of Financial Institutions (OSFI) for a seven-year term as superintendent on June 29. He moves from his current post as chief executive of the Canada Deposit Insurance Corp., after a stint at the federal Finance Department and a Bay Street career analyzing and rating large Canadian banks and other institutions.
President Joe Biden on Wednesday fired the head of the Federal Housing Finance Agency who had been appointed by his predecessor Donald Trump, acting hours after the U.S. Supreme Court expanded presidential powers to make it easier to oust the agency chief.
A small piece of your monthly Canada Pension Plan benefit is missing if you retired recently and chose to start payments immediately rather than delay them.
Former Bank of Canada deputy governor John Murray is cautioning the central bank against “mission creep” as it moves into the final months of a major review of its monetary policy framework.
Banks in the European Union must have a 10-year plan spelling out how they will deal with environmental, social and governance (ESG) risks to their bottom line, the bloc's banking watchdog said on Wednesday.
Investment Executive - Christopher Reynolds (2021-06-23)
Green said federal authorities avoid pursuing Canada’s biggest tax cheats but go after small business owners who don’t pay their taxes under a “two-tiered system” pocked with “loopholes.”
Carolyn Wilkins, the first and only woman to serve as senior deputy governor of the Bank of Canada, begins a three-year stint as one of five external members of the Bank of England’s Financial Policy Committee (FPC) this week.
Reuters - Lewis KrauskopfKate DuguidSaqib Ahmed (2021-06-22)
With all eyes on the U.S. central bank this week, some investors are looking to a parade of Federal Reserve speakers to calm market volatility, saying the reaction to the Fed's June meeting was too extreme.
Many of the generous supports Canada extended during the pandemic are coming to an end. Amongst them, the bank highlights two of the biggest: the Emergency Wage Subsidy, which ends in June; and the Canada Recovery Benefit, which ends in September. Unless extensions are announced, many fear this can be a setback to the recovery. The NBC analysts don’t see it that way.
“The first path is deciding to work together, with the United Kingdom abiding by its obligations and engaging in good faith. And the second path, is if the United Kingdom continues to act on a unilateral basis.”
President Joe Biden will meet with financial regulators on Monday for an update on the country's financial systems and institutions, press secretary Jen Psaki said on Friday.
The dollar index , which tracks the greenback against six major currencies, was up 0.37% at 92.213, its highest since mid-April. That puts the index on pace for a weekly gain of nearly 2%, its best weekly jump in about 14 months.
The Bank of Japan may start debating ways to phase out its extraordinary stimulus programme, such as by ditching negative interest rates, around the time Governor Haruhiko Kuroda's term ends in 2023, said former central bank executive Eiji Maeda.
Looking more broadly at the economy as a whole, we forecast strong consumption-led growth in the second half of this year as vaccinations progress further and restrictions ease. Fiscal stimulus from the federal and provincial governments will also make an important contribution to growth. Strong foreign demand and higher commodity prices are expected to drive exports and business investment, leading to a more broad-based recovery. In our April MPR, we projected that the economy will grow by around 6½ percent this year, about 3¾ percent in 2022 and 3¼ percent in 2023.
Canada’s banking regulator is raising a key threshold for banks’ capital reserves higher than prepandemic levels, rebuilding a buffer that was used to guard against stress in the financial system from the current crisis.
With U.S. inflation rising faster than expected and the economy forecast to grow at its quickest pace in decades this year, some policymakers have begun questioning whether the Fed should continue to keep its benchmark short-term interest rate near zero and leave unchanged a massive bond-buying program put in place to stem the economic fallout from the pandemic.
Britain's finance ministry called on the European Union to open talks on financial services, after the London Stock Exchange on Tuesday urged the bloc to avoid protectionism.
G&M - STEVE AMBLER, JEREMY KRONICK, AND WILLIAM B.P. ROBSON (2021-06-15)
Some indicators, however, are less reassuring. Some of the bank’s own “core” inflation measures, which strip out volatile CPI components such as gasoline and food, are also running above 2 per cent. The bank highlights six on its website: CPI-trim, CPI-median, CPI-common, CPIX, CPI-XFET and CPIW. Each has its advantages and disadvantages, but each is meant to get at inflation’s underlying trend, discounting short-term volatility. Hence, the bank can better set monetary policy with an eye toward the medium-term horizon of six to eight quarters, at which point the bank expects inflation to be at the 2-per-cent target.
Investment Executive - Christopher Rugaber (2021-06-15)
Powell said at the time that he would want to see a “string” of hiring reports showing about 1 million added jobs each month. The job market has yet to reach that total in any month this year, though employers have posted a record-high number of open jobs.
“As a central bank we've always recognised the importance of innovation for the global financial system, and we look to support it wherever possible in the safest manner. Of course, the private sector can create technological and commercial innovation, it is a comparative advantage and expertise. But in the public sector, we have a very vital role in enabling and channelling its development so that it can provide efficient but also safe finance for consumers and businesses across the country.”
In a statement for the record of a Senate Banking subcommittee hearing, ABA notes that choosing between the various CBDC designs requires “serious and complex policy tradeoffs” and that too often CBDC proponents take a “highlight reel” approach to describing CBDC, “cherry picking all the perceived benefits, while downplaying the serious risks to consumers and our financial system.”
The European Union and Canada are holding a summit in Brussels on Monday and Tuesday, with Prime Minister Justin Trudeau meeting EU counterparts after the NATO and G7 meetings. Centre stage in the discussion is the landmark bilateral trade agreement, the Comprehensive Economic and Trade Agreement, or CETA, which has driven an increase in two-way commerce, including a 15-per-cent boost in EU exports to Canada in 2020 alone.
The debt ceiling is the maximum amount the U.S. government can borrow, as directed by Congress, to meet its financial obligations. When the ceiling is reached, the Treasury cannot issue any more bills, bonds, or notes. It can only pay bills through tax revenues.
The International Monetary Fund said on Thursday it has economic and legal concerns regarding the move by El Salvador to make bitcoin a parallel legal tender, further clouding the outlook for an IMF-backed program and widening spreads on the country's bonds.
The Bank of Canada seems pretty intent on ignoring, as much as possible, the raging Canadian dollar. In most instances, that would be a bad idea. In the current circumstances, it may be good policy.
The Federal Reserve has indicated it would need congressional help if the central bank moves ahead with a plan to create a digital dollar. But lawmakers aren't yet ready to give their stamp of approval.
At a hearing Wednesday, Senate Banking Committee members raised questions about how a Fed-designed digital currency would be structured, how it would complement the private sector and whether a digital dollar is even necessary, among other concerns.
Jörg Kukies, deputy finance minister of Germany, told the Financial Times that the Franco-German proposal was “a pragmatic way of ensuring a truthful and compliant Basel implementation on the one hand and respecting the political mandate of [the EU’s economic and financial affairs council] and G20 for no significant increase in capital requirements as well”.
Finance Minister Chrystia Freeland said Saturday an agreement made by Group of Seven (G7) countries on taxing multinational companies and setting a global minimum corporate tax rate was just a first step toward a global deal.
The policy is known as “open banking” and it could provide a competitive shock to a banking system whose idea of competition is engaging in price wars over the issuance of government-backed mortgages. The review has been so slow in coming to what many say are foregone conclusions that some have wondered if the big banks are doing their best to stand in the way of progress. Whatever the reason for the slow going, any delay from this point on will have everything to do with Freeland herself, as she now has all the information and context that she needs.
The PCAOB regulates the audits of publicly traded companies. Congress established it with the Sarbanes-Oxley Act of 2002 following accounting scandals at Enron Corp. and other now-defunct firms. Mr. Duhnke was sworn in as PCAOB chairman in January 2018 under then-President Donald Trump.
The SEC’s new Democratic chairman, Gary Gensler, took control in April. A former banker and regulator, he is expected to be tougher on companies and look to increase investor protections and reporting requirements, for example around disclosures about environmental, social and governance issues.
Finance ministers from the G7 group of rich nations are meeting in London on Friday for two days of talks aimed at moving closer to a global deal to raise more tax from the likes of Google, Facebook and Amazon.
Saudi Arabian oil group Aramco (2222.SE) is in talks with banks for a U.S. dollar-denominated bond issue, two sources said, seeking to raise money ahead of large commitments for its major shareholder, the Saudi government.
It’s not exactly tapering, but the Federal Reserve is starting the clock on withdrawing the emergency measures it used to support financial markets during the Covid-19 pandemic.
The central bank said late Wednesday that it would start to gradually sell the $13.7 billion portfolio of U.S. corporate debt and exchange-traded funds it amassed through its Secondary Market Corporate Credit Facility, which was created during the worst of the pandemic-inspired market meltdown in March 2020. The facility marked an unprecedented intervention for the Fed because it effectively pledged to plow hundreds of billions of dollars into company debt if no one else would. That backstop, even if it wasn’t fully used, quickly restored investor confidence, led to a ferocious rally in practically every corner of the bond market and encouraged record-breaking amounts of debt sales from investment-grade and high-yield borrowers alike.
A mountain of dollars on deposit in China has grown so large that banks are struggling to loan the currency and traders say it poses a risk to official efforts to control a fast-rising yuan.
Stephen Poloz had only been Governor of the Bank of Canada for a few months in the late summer of 2013, when he gave a speech that defined his unique communication style and signalled a new era for a traditionally staid institution.
Carney, who led the Bank of Canada from 2008 and 2013 and the Bank of England from 2013 to 2020, advised the Liberal federal government on its latest budget and is widely considered to have political aspirations to run for the Liberal party.
Australia’s central bank is approaching a decision on whether the economy is strong enough for it to join Canada and New Zealand in signaling a move away from emergency mode.
The early deficit figure for the 12-month period between April 2020 to March 2021 compares to a deficit of $21.8 billion over the preceding fiscal year.
The Bank of Canada is closely monitoring the rise of cryptocurrencies and other digital forms of cash, but has no plans at the moment to launch its own digital loonie, a deputy governor said Wednesday.
The Bank of Canada is thinking in more concrete terms about how its digital currency might look and work but it does not currently see a strong case for issuing one, a deputy governor said on Wednesday.
The budget and its stimulus plan certainly didn’t ignore measures to fuel growth in labour supply (most notably, the national child care plan) and small-business investment and innovation (such as the Canada Digital Adoption Program). But the vast bulk of spending in the package over the next year continues to be targeted at wage subsidies and income supports for workers and employers hit by COVID-19 shutdowns and restrictions. The effect of these programs is, ultimately, to keep money flowing into consumers’ pockets – which keeps consumer demand humming.
The Bank of Canada is also ramping up its research agenda. The FSR included the results of a deep study of natural disasters in Canada based on data that dates to 1900. Using artificial intelligence, the central bank determined that about 40 per cent of the country’s total household debt is held by households living in parts of the country that face “high exposure” to wildfires and other such catastrophes.
With global borrowing costs probably as low as they can go, high debt levels will start to matter more in coming years, a Barclays study found, highlighting Brazil as the country at greatest risk of a hit to growth and debt sustainability.
The crackdown on unregulated crypto trading in Canada has begun, with the Ontario Securities Commission (OSC) bringing allegations against a Seychelles-based firm for failing to heed the regulator’s warning to get registered.
That's why the first and biggest risk outlined by the bank in its report was "a large decline in household income and house prices" caused by an external trigger event. It is hard to be sure what form such a trigger event could take. Macklem referred at one point to a "sharp repricing of risk." Such an event might lead to, say, a sudden rise in global interest rates, a stock market crash or a weakening of global trade. Maybe even the collapse of bitcoin.
The Financial System Review (FSR) summarizes the Governing Council’s judgment on the main vulnerabilities and risks to the stability of the Canadian financial system and highlights the efforts of the Bank and other Canadian and international regulatory authorities to mitigate those risks. After a brief survey of macrofinancial conditions, the principal vulnerabilities and risks are examined.
The Bank of Canada said volatility in cryptocurrency assets is an emerging vulnerability to the country’s financial system, a day after a major selloff in the sector.
When Bank of Canada Governor Tiff Macklem delivered a speech last week championing diversity and inclusion, he took a moment to deliver a mea culpa from the upper echelon of the central bank.
The title of his remarks was “Including everyone helps us all.” Macklem talked about the importance of diversity, noting that research on the question is settled: strategy and decisions made by leadership teams that feature women, racialized individuals, and disabled people do better than C-suites and boards of directors that are dominated by white men. “Diverse and inclusive groups make better decisions,” Macklem said. “That’s because they can avoid groupthink that happens when decision-makers all have similar backgrounds and approach problems the same way.”
FP - Julie Gordon and David Ljunggren (2021-05-18)
The Bank of Canada said on Thursday that some of the monetary policy tools it is using to address the COVID-19 pandemic, such as quantitative easing (QE), could widen wealth inequality and that it was looking closely at the issue.
The Financial System Review will be released on Thursday, May 20, 2021. The Financial System Review (FSR) summarizes the Governing Council’s judgment on the main vulnerabilities and risks to the stability of the Canadian financial system and highlights the efforts of the Bank and other Canadian and international regulatory authorities to mitigate those risks. After a brief survey of macrofinancial conditions, the principal vulnerabilities and risks are examined.
Bank of England governor Andrew Bailey has said that money market funds (MMFs) proved in the early stages of the pandemic that they were “not sufficiently resilient”. That is despite efforts to increase the stability of MMFs after their involvement in the demise of Lehman Brothers and the crash in 2008.
G&M - BILL CURRY AND PATRICK BRETHOUR (2021-05-12)
Conservative and NDP MPs questioned the minister about a Globe and Mail investigation, which found that hundreds of publicly traded companies, or their wholly owned subsidiaries, together received at least $3.6-billion in Canada Emergency Wage Subsidy payments as of late January. Among those companies were some of the biggest names in corporate Canada, as well as dozens of hedge funds and wealth managers.
The federal government is set to launch a public-private advisory body aimed at accelerating the adoption of sustainable-finance measures, on which Canada risks lagging behind its trading partners.
Former British Prime Minister David Cameron repeatedly contacted senior ministers over a four-month period in 2020 to lobby for the now-failed, supply-chain finance firm Greensill Capital, according to documents published on Tuesday.
American Banker - Brendan Pedersen, Kevin Wack (2021-05-12)
For nearly a decade, the Federal Reserve avoided choosing sides in the protracted, high-stakes dispute between banks and retailers over debit card fees.
The North American country plans to sell five-year bonds in the first benchmark-sized transaction in the currency since January 2020, Bloomberg data show. The bonds, which are expected to be priced Tuesday, are being marketed at around 8 basis points over U.S. Treasuries, according to people familiar with the matter.
The central bank published a paper examining the operation of Canada’s electronic funds transfer system for large payments, the Large Value Transfer System (LVTS), during the pandemic.
But that comforting scenario rests on some optimistic to highly optimistic long-term assumptions about productivity growth, economic expansion, interest rates and inflation. If all of those factors don’t turn out as favourably as the Finance department is forecasting, then that steady march to stability could instead turn into a permanently elevated debt burden – or even an upward spiral.
The Liberal government’s 2021 budget underestimates the likely size of federal deficits by about $5.6-billion a year and puts Ottawa on a long-term path of higher debt, says Parliamentary Budget Officer Yves Giroux.
Regarding Mickey D. Levy and Michael D. Bordo’s “The Fed in the Sand as Inflation Threatens” (op-ed, April 27): I have been calling on Fed Chairman Jerome Powell to release his plan to curb the effects of inflation for several months. Last month, I finally heard back from him. He told me that he doesn’t want inflation that substantially exceeds 2%, or inflation for a prolonged period.
Overall the programs, which include stepped-up spending on infrastructure, childcare and education, will make a “big difference” to inequality, Yellen said.
In the aftermath of an economic and financial challenge that Federal Reserve Chairman Jerome Powell recently likened to Dunkirk—the urgent rescue of British and other Allied troops from France in World War II—there’s a remarkable uniformity of opinion on the Federal Reserve Board of Governors. Apparently, they all agree on the appropriateness of the Fed’s monetary-policy decisions. That’s what worries me.
In 2015, the federal Liberal platform committed the party to reversing a Conservative plan to gradually raise the retirement age (or at least the eligibility age for Old Age Security payments) to 67 from 65, arguing that seniors needed the money more than Ottawa.
“I would say, ‘Governor, I’m sure glad we’re learning from the lessons of history,’” Easter, a Liberal, said during Macklem’s testimony at his committee on April 27. “I’m one, and there may be others on this committee, who faced a 23-per-cent interest rate in the 1980s and I’ll tell you we paid for that for a very long time.”
The BoC’s April Monetary Policy Review (MPR) said inflation data would be unreliable. More specifically, the three measures — CPI-trim, CPI-median, and CPI-common would be unreliable. Arseneau says, “last week’s imbroglio [embarrassing situation] over inflation in Canada comes at a bad time.”
The combination of the Bank of Canada’s loose monetary policy and the federal government’s massive spending is a necessary response to an epic catastrophe. There’s an echo of the 1960s and 1970s, a period that inspired the music of Leonard Cohen, Joni Mitchell and Neil Young, but ended in one of the worst recessions in Canadian history.
David Dodge has had a few days to take a look at the budget that the federal Liberal government unveiled last week. He’s not a fan – of the math or the substance.
"Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened," the U.S. central bank said in a unanimous policy statement at the end of a two-day meeting.
That's been the case in British Columbia, where a government-commissioned report estimated money launderers parked $5.3 billion in real estate in 2018 alone — enough that it drove up housing prices by five per cent.
Bank of Canada Governor Tiff Macklem said the central bank is not concerned about a temporary spike in inflation that is expected to take Consumer Price Index growth to around 3 per cent in the coming months.
The Bank of Canada is looking to improve how it researches and analyzes economic issues relating to Indigenous communities as part of a joint initiative with the central banks of New Zealand and Australia.
New threats that increasingly keep banking regulators up at night present a fresh set of challenges because they fall outside the traditional boundaries of financial risk management. They include global threats such as climate change, fast-moving innovations in technology and cybersecurity and the emergence of new asset classes such as crypto assets – an uncharted and largely unregulated area for financial institutions that is “growing in importance,” Mr. Gully said.
In a Monday evening vote, lawmakers from the New Democratic Party backed Finance Minister Chrystia Freeland’s plan to help the Canadian economy recover from its pandemic-induced losses. The vote in the House of Commons was 178 to 157 in favor.
Bloomberg - Theophilos Argitis and Ye Xie (2021-04-23)
In a surprise move, it accelerated the timetable for a possible interest-rate increase and began paring back its bond purchases on Wednesday. That made Canada the first major economy to signal its intent to reduce emergency levels of monetary stimulus.
It’s a turn in policy by Governor Tiff Macklem that shows there’s a limit to how much he’s willing to test the upper boundaries of inflation, with new forecasts showing the central bank expects the biggest persistent overshoot of its 2% target in at least two decades. The question is whether Canada’s situation is unique, or foreshadowing the start of a global exit from stimulus.
Canada’s inflation-targeting central bank just acknowledged that inflation is headed above its 2-per-cent target in the post-COVID-19 recovery. And you know what? It’s okay with that.
New signs of a strong recovery — including the bank's prediction of a stunning global growth rate of nearly seven per cent this year — plus indications that the underlying foundation of the Canadian economy has not suffered serious damage from the COVID-19 pandemic, mean the central bank is scaling back on monetary stimulus.
Nothing makes our central bankers, academics and government officials sound more out of touch with Main Street these days than when they talk about low levels of inflation. The problem is that ultra-low interest rate policies justified by CPI tracking don’t seem to help much when income levels are stagnating and asset prices are surging.
“I thought the bank might try to complain about or argue against CAD strength -- it didn’t,” Anderson said. “The bank merely made the factual statement that CAD had rallied alongside commodity prices. Based on that, I’m slightly less worried about the BOC trying to push back against CAD strength in the future.”
There was a time in this fair land when a federal budget was an economics document. These days, it is a social policy document aimed to buy votes. It’s actually quite sad.
The Treasury Department has a warning for the emerging world: The export-your-way-to-prosperity template has fallen out of favor. Once thought to be in U.S. interests — as a way of getting plentiful cheap goods — this model of development is now meeting more skepticism. The message for Asia should be loud and clear, even if some economies got a pass last week.
In its semiannual assessment of trading partners’ foreign-exchange policies, Treasury stopped short of labeling Taiwan, Vietnam and Switzerland as currency manipulators, even though they met the criteria. In normal times, they would have been branded with a Scarlet M for deliberately holding their currencies down. But officials couldn’t determine whether their less-than-ideal practices were done to seek a trade advantage, or simply to buttress markets and alleviate recession. The pandemic skewed capital flows globally, and many countries — the U.S. among them — responded in kind. This time, the trio got away with a rap on the knuckles. The softer approach is a shift from the Trump administration, which tagged Hanoi and Bern as manipulators, and admonished a bunch of others, including India, Thailand, Singapore and South Korea.
The federal government is pinning its new “fiscal anchor” to a rapid postpandemic recovery, with economic growth expected to put the government’s debt-to-GDP ratio on a downward trajectory over the next few years, despite continuing deficits.
Ottawa added more than $350-billion to its accumulated debt last year, and expects to run another deficit of $154.7-billion this year. Federal debt now stands at $1.08-trillion or 49 per cent of GDP, up from $721-billion or 31.2 per cent before the pandemic.
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economists and business groups were calling for the government to adopt a fiscal anchor – that is a target, such as a debt-to-GDP ratio, to moderate deficit spending and debt accumulation. The government responded with a loosely defined commitment to unwind its emergency spending and reduce the size of its debt relative to the size of the economy “over the medium term.”
The outlook suggests officials still want to guarantee the recovery from last year’s coronavirus recession by maintaining ultra-low borrowing costs and asset-buying programs. That may require them to accept any accompanying bounce in inflation.
Canadian real estate prices are rising at rates even the banks are warning about. There’s a lot of reasons this is happening, but one rarely discussed is the supersized borrowing from the Government of Canada (GoC). A lot of cash was needed during the pandemic, but Canada’s discretionary spending topped the G20. To help facilitate this spending, the Bank of Canada (BoC) made use of quantitative ease (QE). The unconventional policy tool’s use is debated, but its impact is well established.
If I were finance minister, I’d be asking myself the following question: With a recovery just getting going following a deep recession, should I act like Marc Lalonde in 1983 or Paul Martin in 1994? Or should I chart my own course?
Bloomberg - Kait Bolongaro and Theophilos Argitis (2021-04-19)
Justin Trudeau is set to unveil a vision for Canada’s post-pandemic recovery that will double as an election platform, heavy on new spending and assurances the mounting debt is affordable.
Internal documents from the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) obtained through freedom of information legislation paint a picture of substantial disruption at the agency, especially in the first few months of the pandemic, when hundreds of employees were abruptly forced to work from home.
How should a central bank respond to global warming? In Sweden, a body created to monitor government efforts to fight climate change says the law that guides monetary policy needs a serious overhaul.
Cecilia Hermansson, the vice chair of the Swedish Climate Policy Council, is advising the government to include environmental considerations in the Riksbank Act, which is currently under review. She also says an existing proposal to amend the law doesn’t go nearly far enough.
FT - Henry Foy, Katrina Manson, Michael Peel (2021-04-15)
On Wednesday, the US for the first time formally blamed SVR, Russia’s foreign intelligence service, for the SolarWinds hack, which affected at least nine federal agencies and 100 companies. One senior administration official told reporters the hack gave Russia “the ability to spy on or potentially disrupt more than 16,000 computer systems worldwide”.
According to Federal Reserve Chair Jerome Powell, the U.S. economy is at an "inflection point" with expectations that growth and hiring will pick up speed in the months ahead, but some risks remain, particularly any resurgence in the coronavirus pandemic.
Europe faces a predicament. Even as it struggles to contain the Covid-19 pandemic, it’s setting itself up for another crisis — this one financial. To ensure the viability of the common currency at the heart of the European project, the EU’s leaders will have to cooperate in ways they’ve so far resisted.
Mnangagwa has previously issued warnings to private companies he blames for undermining his efforts to turn around an economy plagued by annual inflation of 241% and foreign-currency shortages. Last year, his government closed the Zimbabwe Stock Exchange for five weeks and singled out the largest mobile operator, Econet Wireless Zimbabwe Ltd., for undermining the nation’s currency through its mobile money service
Most respondents also said they would prefer an approach that balances the level of interest rates to benefit both savers and borrowers. Additionally, the majority viewed inflation targeting as the most easily understood approach.
For OSFI, our focus in these matters is prudential. That is to say that our unique role is to ensure that Canadians continue to enjoy financial stability as climate-related risks manifest themselves. This is a very important role, and one that we take very seriously, especially as we are the only arm of the Government of Canada that is equipped to meet this prudential responsibility.
Last fall, as Chrystia Freeland began laying the groundwork for a postpandemic recovery strategy that would heap more debt onto the federal government’s already immense pile, she felt obliged to assure Canadians that, no, she hasn’t invited a three-initialled economic bogeyman to live under our bed.
Carolyn Wilkins, the former second-in-command at the Bank of Canada, has been appointed to the Bank of England committee that oversees financial stability in Britain.
The federal government has been borrowing a lot of money to fight the pandemic. But with national debt rising, lawmakers disagree on how to deal with that debt and pay for priorities going forward. WSJ’s Gerald F. Seib explains. Photo illustration: Emma Scott
The massive increase in government spending in Canada and around the world in response to the COVID-19 pandemic has been accompanied by a siren song in the form of a new economic theory: “Modern Monetary Theory,” or MMT for short. But as we begin to emerge from the acute phase of the pandemic we need to turn a deaf ear to that song. Now that inflation concerns are beginning to stir it is hard to imagine governments raising taxes or cutting spending anytime soon to keep inflation in check — yet that’s how MMT advocates would control inflation, with what traditionally have been regarded as fiscal policies rather than the customary monetary tools of interest rates and liquidity measures.
That would put America’s headline rate above many Western nations. Biden’s blueprint also includes a minimum tax of 21% on the income U.S. companies earn on assets like patents and trademarks outside the United States, up from the current floor of around 10%.
Last week, the CMAIO, which was established in 2015 to guide the launch of a national capital markets regulatory authority, put its operations on pause and laid off its staff. The organization said that it could resume its work in the future “when there is greater certainty around cooperative system launch timelines.”
Yellen said it was important to make sure governments “have stable tax systems that raise sufficient revenues in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government.”
FP - Steve Ambler, Jeremy M. Kronick and William B.P. Robson (2021-04-06)
On March 23, the Bank of Canada announced the upcoming suspension of some of its major asset-purchase programs. This is good news. Financial stresses at the beginning of the pandemic a year ago led the bank to buy the debt of provincial governments and private companies. Those stresses are now in the past and Canadians should welcome the bank’s retreat from a role fraught with economic and political risks.
In 2019, the Reserve Bank of New Zealand, which in 1989 became the first central bank to adopt a formal inflation target, was told by Jacinda Ardern’s government to include “maximum sustainable employment” as an objective. Earlier this year, Ardern added “sustainable house prices, including dampening investor demand for existing housing” to governor Adrian Orr’s agenda.
Reuters - Steve Holland, Jarrett Renshaw (2021-04-01)
“It’s a once-in-a-generation investment in America, unlike anything we’ve seen or done since we built the interstate highway system and the space race decades ago,” Biden said in unveiling the program in Pittsburgh.
Bloomberg - Ari Altstedter and Erik Hertzberg (2021-04-01)
The Bank of Canada is seeing “worrying” signs that some Canadians are taking on too much debt to buy into the nation’s hot housing market.
In an interview with the Financial Post, Governor Tiff Macklem said there is evidence that loan levels relative to home values are growing -- an indication that some borrowers could be overextending. He also warned people have begun to make purchases based on the belief prices will continue rising.
“Canadians are stretching and that is worrying.” Macklem said. “If Canadians are basing their decisions on the kinds of price increases that we’ve seen recently are going to continue indefinitely, that would be a mistake. They’re not sustainable.”
At the same time, Macklem indicated the central bank can do little given interest rates need to stay low to support the recovery.
CIBC clients are exempt from the Covid-19 pet owners tax. In effect from March 31st, municipal authorities require Canadian's to adhere to strict lockdown measures with the excpetion of pet owner that must walk their pets regularly. Therefore, dog and cat owners have been exempt from curfews. Consequently, a Canadian pet owners will be required to pay a dog and cat tax that would require every cat owner in to pay $40 (about $35) a year. But fear not, because you get a cat licence, complete with a picture of your cat, to show the tax man that you and your kitty are law-abiding citizens. CIBC clients are exempt because they have decided to compensate clients that own pets.
The federal government and seven provinces and one territory are shutting down the organization charged with creating a national securities regulator due to waning political support for the project in jurisdictions such as Ontario and British Columbia.
The Federal Reserve won’t bend its interest rate or bond-buying policies to help finance the federal government’s rising deficits, Christopher Waller said on Monday in his debut speech as a member of the U.S. central bank’s board of governors.
G&M - MARK RENDELL AND DAVID PARKINSON (2021-03-27)
It was Mar. 27, 2020, and the central bank had just unveiled a plan to buy Canadian government bonds at the astounding pace of at least $5-billion a week.
In a speech on Tuesday, deputy bank governor Toni Gravelle said the central bank will let its commercial paper, provincial bond and corporate bond buying programs expire in the coming months, now that debt markets are functioning normally. It will also end two sales and repurchase agreement – or “repo” – programs launched last March to pump cash into financial institutions that faced a liquidity crunch early in the pandemic.
“I want to be clear here: moderating the pace of purchases while adding to our holdings would simply mean that we are still adding stimulus through QE, but at a slower pace,” Gravelle said. “It would not mean we are removing stimulus. We would be easing our foot off the accelerator, not hitting the brakes.”
The Office of the Superintendent of Financial Institutions (OSFI) plays an essential role in building and preserving resiliency in Canada’s financial system. OSFI’s commitment to implementing the international Basel III Framework has strengthened Canadian banks and improved their ability to handle financial shocks, so they can continue to support economic growth while remaining competitive.
U.S. Treasury Secretary Janet Yellen on Wednesday said U.S. banks look healthy enough to be allowed to pay dividends and repurchase stock, an updated view that reflects top economic officials’ growing confidence in the recovery from the coronavirus pandemic.
Chris Chezepock thought he was making a simple call to unlock his online taxpayer account when he rang up the Canada Revenue Agency on Wednesday morning.
Consumers pare back spending as they either lose their jobs, or worry about the prospect of unemployment. That hurts sales at businesses, which then cut back on payroll, and those workers then reduce their spending. And for 80 years, the typical political response to myriad typical recessions has been to dump a lot of money into the economy to break that cycle of misery.
Canada’s inflation rate edged up in February on rising gasoline prices, coming in below analysts’ estimates but setting the stage for a jump in consumer price index growth in the coming months.
Turkey is paying for past errors that cost it credibility and let inflation accelerate to nearly 16%, over three times its target. In the UK, prices have been rising too slowly rather than too fast. And even if they overshot for a bit, public and market expectations of inflation remain firmly anchored. The contrast explains why using monetary policy to support economic recovery is a luxury not available to all. (By Swaha Pattanaik)
The trial of a Canadian man detained in China since late 2018 on espionage charges has ended after about two hours, a lawyer said, one day after relatives pleaded for his release.
Michael Spavor and Michael Kovrig will face their first court hearings Friday and Monday respectively, Canadian Foreign Minister Marc Garneau said in an emailed statement, adding that diplomats have requested to attend. “We believe these detentions are arbitrary, and remain deeply troubled by the lack of transparency surrounding these proceedings,” Garneau said.
The central bank envisages keeping rates near zero to the end of 2023 despite a significantly brighter assessment of growth and higher inflation over the near term. After the release, traders trimmed some of the more-aggressive positioning they’ve been building for a “lift-off” by earlier in 2023.
Like many small businesses across China, Zheng Weijun’s freight company had struggled to obtain credit from the state-dominated banking system. But in 2018 the 12-lorry business discovered Fincera, a peer-to-peer platform in Hebei province that collected money from retail investors starved of returns and channelled it to borrowers, mainly small trucking and logistics companies.
CRA's move comes in the middle of one of the most complicated tax seasons in recent memory, as millions of Canadians prepare to file taxes after receiving COVID-19 benefits.
A reduction of purchases by the BoC could be supportive of the Canadian dollar, which has been the best performing G10 currency this year, with a gain of about 2 per cent against the U.S. dollar. The central bank said this month that the currency has been relatively stable against the greenback.
By raising its 2021 growth forecast to 6.5%, the Fed joined others in substantially improving its outlook for the U.S. economy. The forecast for the unemployment rate was reduced to 3.5%. Meanwhile, the Fed moved its favored measure of inflation — the PCE — up from 1.8% to 2.4%, for this year, with the core measures rising more moderately to 2.2%.
Despite these historically large revisions, the central bank’s policy statement remained virtually unchanged. The implied message — that the Fed will be even more ready to support an economy running ever hotter — was more than confirmed by Powell’s ultra-dovish comments at his press conference.
These measures included a reduction in the Stressed Value at Risk (“SVaR”) multiplier, a component of the market risk capital requirements that ensures that a minimum amount of capital is held against stress periods. At the beginning of the pandemic, the volatility in capital markets increased such that the level of additional conservatism achieved through the SVaR multiplier was temporarily not needed and banks were permitted to reduce the level of the multipliers used.
The new technology platform uses custom-built algorithms to monitor, in real-time, a mix of data points from official emergency sources and weather alert systems to offer one-to-one, personalised support for customers impacted by natural disasters.
The Bank of Canada has expanded the size of its daily bond sale and repurchase program, making more securities available to dealers in an attempt to counteract the impact that its large ownership of Government of Canada bonds is having on short-term funding markets.
Policy makers in Canada need to keep supportive measures in place as the economy recovers from the COVID-19 pandemic before turning to debt management, the Organization for Economic Co-operation and Development said Thursday.
OSFI launched a consultation on measures to implement the remaining features of the latest edition of the global capital adequacy regime, known as Basel III — which includes capital, liquidity, leverage and disclosure requirements — that was developed in response to the global financial crisis.
The Bank of Canada has set a high bar for the eventual raising of interest rates. But that doesn’t mean the central bank is equally reluctant about scaling back its quantitative easing program, even if it’s not yet willing to say so out loud. They’re two separate and distinct questions.
The Bank of Canada acknowledged it had underestimated the economy’s ability to power through the second wave of COVID-19 infections, scrapping its January prediction that gross domestic product (GDP) would contract in the first quarter of 2021.
Economists unanimously predict policy makers led by Governor Tiff Macklem will leave their key interest rate unchanged at 0.25% at a 10 a.m. decision Wednesday in Ottawa. There’s speculation, however, they could signal plans to pare back the central bank’s asset purchases at the next meeting in April.
Central banks are flooding economies with cheap credit, and trying to prevent bubbles. Well, some countries are trying to prevent bubbles. Canada has decided home price inflation is an uncontrollable consequence of the environment. In fact, the country’s central bank welcomed the rapid home price growth as “needed.”
The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank is maintaining its extraordinary forward guidance, reinforced and supplemented by its quantitative easing (QE) program, which continues at its current pace of at least $4 billion per week.
Junko Nakagawa, a Nomura Holdings executive picked by Prime Minister Yoshihide Suga to join the Bank of Japan’s board, is seen as a policy moderate who’s likely to support the board’s current direction after her trailblazing rise in Japan’s male-dominated finance industry.
Nakagawa, now 55, was the first woman appointed to Nomura’s board, where she served as the group’s chief financial officer in the early 2010s, before becoming head of the asset management unit in 2019. If approved, she would replace Takako Masai, another former banker, as the only woman on the BOJ’s nine-member board.
On Wednesday, March 10, 2021, the Bank of Canada will announce its decision on the target for the overnight rate. A press release will provide a brief explanation of the decision.
The Bank of Canada will be walking a tightrope when communicating its rate decision this week, as rising bond yields and strong economic data have put its downbeat forecast at odds with brightening market expectations for a postpandemic recovery.
Bloomberg - Lizzy Burden and Andrew Atkinson (2021-03-08)
Bank of England Governor Andrew Bailey said risks to the U.K. economy remain tilted to the downside, a remark that may rein in expectations that policy makers may soon shift toward containing inflation.
“To us, it now appears likely that the U.S. output gap will be closed by the end of 2021 — an astonishing feat given just how ugly things were a year ago and highlighting once more how fundamentally different this latest recession has been from all those that have gone before it,” the report said.
Mark Machin already had one foot out the door of Canada Pension Plan Investment Board when he was forced, under pressure, to resign as chief executive officer last week after receiving a COVID-19 vaccination in the United Arab Emirates.
The British government has announced the country’s biggest corporate tax hike in almost 50 years in a bid to slowly fill the fiscal hole left by the pandemic.
Evan Siddall, the outspoken housing agency chief who once told Canadians not to worship homeownership, is stepping down in April, ending his controversial and combative tenure.
Most sectors have almost reached pre-crisis levels, and the laggards that were hit hardest by the pandemic “are also the ones with potentially the most to gain should behaviour start to respond favourably to vaccinations over 2021 into 2022,” the report said.
Federal subsidies for wages and rent will be extended at current levels until June 5, a move Finance Minister Chrystia Freeland said will cost about $16-billion.
Justin Trudeau was more committed to borrowing his way out of the Covid-19 crisis last year than almost any other leader in the developed world. That cushioned the blow of the pandemic, but raises some hard questions about what Canada got for all that spending.
Today's order states that trading is being suspended because of questions about recent increased activity and volatility in the trading of these issuers, as well as the influence of certain social media accounts on that trading activity. The order also states that none of the issuers has filed any information with the SEC or OTC Markets, where the companies' securities are quoted, for over a year. As a result, the SEC suspended trading in the securities of: Bebida Beverage Co. (BBDA); Blue Sphere Corporation (BLSP); Ehouse Global Inc. (EHOS); Eventure Interactive Inc. (EVTI); Eyes on the Go Inc. (AXCG); Green Energy Enterprises Inc. (GYOG); Helix Wind Corp. (HLXW); International Power Group Ltd. (IPWG); Marani Brands Inc. (MRIB); MediaTechnics Corp. (MEDT); Net Talk.com Inc. (NTLK); Patten Energy Solutions Group Inc. (PTTN); PTA Holdings Inc. (PTAH); Universal Apparel & Textile Company (DKGR); and Wisdom Homes of America Inc. (WOFA).
Statistics Canada took a pratfall this week on some key inflation calculations, and it couldn’t have come at a much more inopportune time. So why doesn’t Bank of Canada Governor Tiff Macklem – whose central responsibility is all about inflation – sound more bothered?
FT - Philip Stafford and Delphine Strauss in London and Sam Fleming (2021-02-25)
Its stance has increasingly drawn criticism from the UK’s central bank governor, who on Wednesday focused on the tussle over clearing houses, which sit between deals and prevent defaults from creating a chain reaction across markets.
Macklem, who took over as Bank of Canada governor in June, is making inequality the focus of policy, as Powell in the United States and Christine Lagarde at the European Central Bank have also done. On Feb. 23, Macklem made it clear that he intends to let the economy run hotter for longer than most mainstream economists would have thought safe only a few years ago, reinforcing both the likelihood that interest rates will remain extremely low for at least another couple of years and that more people will potentially get to participate in the recovery.
Over the past year Federal Reserve Chair Jerome Powell has engineered the largest economic rescue in U.S. history, thrown a controversial lifeline to companies hard hit by the coronavirus pandemic and steered a sweeping labour-friendly revamp of monetary policy that any presidential administration would welcome.
Asked by students at Durham University when interest rates might return to the level of 4% to 5% common before the financial crisis, Vlieghe replied: “Maybe not in my lifetime.”
Draghi, one of Europe’s most highly regarded public officials, was unexpectedly called in by Mattarella earlier this month after the previous coalition collapsed in the middle of the latest pandemic wave.
The sudden revision surprised economists, causing some to question whether Statscan had an accurate picture of inflation. The change was made amid growing concern about higher-than-expected inflation, which is driving bond yields up and sending jitters through the market.
When Guideline B-20 revisions were introduced, lenders made changes that reduced the proportion of mortgages approved for the most highly indebted or over-leveraged borrowers (e.g. mortgage loans that exceed 450% of a borrower’s income.)
The contribution from government development bank the Japan International Cooperation Agency will support efforts to improve African countries’ economic resilience at a time when many are struggling with the coronavirus pandemic, the AfDB said in a statement.
Hedge fund managers, professional investors and specialists in the more arcane corners of trade processing are clearing their diaries and checking popcorn supplies for a session that could determine how regulators deal with an explosion in trading by amateurs for years to come.
In a time of global crisis, the persistent excess savings of the Asian nations need to be drawn down to help stimulate global growth — otherwise why were they accumulating these reserves other than for “beggar thy neighbour” purposes?
Speakers include Robinhood CEO Vladâ¯Tenev, hedge fund Citadel CEO Kenneth Griffin,â¯Reddit CEO and co-founder Steve Huffman, Melvin Capital CEO Gabrielâ¯Plotkin, and day trader Keith Gill, who is credited with rallying the retail interest in GameStop through Reddit forum WallStreetBets.
A top Bank of Canada official called the recent spike in cryptocurrency prices “speculative mania,” and said such assets don’t have the qualities to become the money of the future.
WSJ - Josh Mitchell and Eliza Collins (2021-02-05)
The Biden administration is considering using executive action to forgive Americans’ federal student debt, the White House’s chief spokeswoman said Thursday, responding to pressure from Democratic lawmakers and progressive groups.
The federal government has directed the Canada Infrastructure Bank to invest at least $1-billion in revenue-generating projects that benefit Indigenous peoples as part of a new statement of priorities for the Crown corporation.
Bank of Canada deputy governor Lawrence Schembri is expecting little change to the central bank’s current inflation targeting regime, even as it examines alternative monetary policy targets, including a potential “dual mandate” that would put a more explicit focus on employment.
Businesses can qualify for between $25,000 and $1 million if they meet the eligibility requirements, the main one being that they must show their revenues have fallen by at least 50 per cent for at least three months out of the previous eight.
A major tax battle between the Canada Revenue Agency and the country’s six biggest banks has more than doubled in size over the past few years, with the lenders saying they are being reassessed for in excess of $6 billion due to a disagreement over dividends.
Bitcoin is "more of a speculative asset than money" that should perhaps "be seen more like a community of online gamers, who exchange real money for items that only exist in cyber space," says Carstens in a speech on digital currencies to the Hoover Institute.
Central bankers around the world are ramping up research into digital currencies, according to the Bank of International Settlements, even as cryptocurrencies such as bitcoin are likely to remain niche products with little use as payment methods.
The federally backed loan can be used for rent, utilities and help with payroll, among other costs, to keep operations running through public health restrictions, but can’t be used to pay or refinance existing loans.
The government has outlined far reaching proposals to strengthen the international competitiveness of the UK’s £9.9tn asset management industry with tax reforms and innovative fund structures, providing a road map for the sector’s future outside of the EU.
Australia’s securities regulator said on Monday there was a cyber security breach at a server it used to transfer files including credit licence applications where some information may have been viewed.
Among other things, the task force called for a restructuring of the Ontario Securities Commission (OSC), including spinning out its adjudicative function, separating the chair and CEO roles, expanding its mandate to include promoting growth and even changing its name — to the Ontario Capital Markets Authority.
Set up in 2019 the BIS Innovation Hub has centres in Switzerland, Hong Kong and Singapore, with locations in Toronto, London, Frankfurt and Paris, and Stockholm on the horizon.
The centre will shape and steer the ECB’s climate agenda internally and externally, building on the expertise of all teams already working on climate-related topics. Its activities will be organised in workstreams, ranging from monetary policy to prudential functions, and supported by staff that have data and climate change expertise.
A W-shaped recovery from the COVID-19 pandemic could trigger a nearly 50 per cent drop in housing prices and a peak unemployment rate of 25 per cent, if the government doesn’t offer relief, says the Canadian Mortgage and Housing Corporation.
To be sure, these are future considerations. There won’t be any talk of higher interest rates when the Bank of Canada’s leaders conclude their latest round of policy deliberations on Jan. 20. The most pressing concerns for the central bank at this stage are whether a grim winter will cripple the recovery, and when to slow its multi-billion-dollar bond-purchase program, which could create asset-price bubbles if left in place too long.
The Bank of England said on Wednesday the aim of its banking stress test this year is to check if banks can continue helping the economy during the pandemic and if a return to more normal levels of dividends is possible.
Janet Yellen made the case for another sweeping economic aid package at her hearing to be the next U.S. Treasury secretary Tuesday, pushing back against Republican skepticism of the need for more deficit spending to bolster the recovery.
Foreign investors added $11.8 billion worth of Canadian securities during the month, “largely purchases of federal government debt,” the agency said Monday. Canadian investors acquired $7.6 billion of foreign securities, led by U.S. equities.
The concerns were laid out in a memorandum addressed to then-finance minister Bill Morneau from his deputy in early 2020. The document, which was recently obtained by the Post via access-to-information request, explored the drivers of rising numbers of consumer insolvencies.
Few economists and market analysts expect the central bank to trim its overnight target rate on Wednesday. But they say the possibility can’t be ruled out as the bank tries to balance the near-term pain of lock-downs against better-than-expected vaccine news and robust fiscal stimulus.
Investment Executive - Christopher Rugaber (2021-01-15)
During an online discussion hosted by Princeton University, from which Powell earned his undergraduate degree, the Fed chair said the recovery of the economy from the pandemic recession “is far from our goals.” The Fed had said after its last policy meeting last month that it would continue to buy $120 billion in bonds each month until the economy made “substantial further progress” toward the Fed’s goals of maximum employment and stable 2% inflation.
Joe Biden pleaded for Congress to “act now” on a new $1.9tn economic rescue plan, setting it up as his top legislative priority as he prepares to enter the White House next week.
Boosting Canada’s long-term economic growth by reducing interprovincial trade barriers and introducing programs such as universal daycare may be the best way to manage ballooning federal and provincial government debt, former Bank of Canada governor Stephen Poloz says.
Investment Executive - Martin Crutsinger (2021-01-14)
The U.S. government’s deficit in the first three months of the budget year was a record-breaking $572.9 billion, 60.7% higher than the same period a year ago, as spending to deal with the Covid-19 pandemic pushed outlays up while revenue declined. (All figures are in U.S. dollars.)
China plans to push tech giants including Ant Group, Tencent and JD.com to share consumer loan data to prevent excess borrowing and fraud, two people with knowledge of the matter said, in Beijing’s latest tightening of scrutiny.
U.S. President Donald Trump on Tuesday (January 5) signed an executive order banning transactions with eight Chinese software applications, including WeChat Pay and Alipay. Gloria Tso reports.
The world’s biggest economies shouldering record debt burdens are about to confront an unwelcome legacy of the financial crisis: a $13 trillion debt bill.
Reuters - Neil Unmack, Anna Szymanski (2021-01-04)
Central bankers will spend 2021 trying to tame the debt monsters they made in 2020. The pandemic-induced market meltdown forced Federal Reserve Chair Jay Powell to buy corporate debt for the first time, while European Central Bank President Christine Lagarde unveiled plans to spend an unprecedented 1.85 trillion euros propping up markets. Yet in helping resolve the crisis, rate-setters sowed the seeds of the next one.
Ontario Finance Minister Rod Phillips stepped down from the position amid public outrage that he was vacationing in the Caribbean over the holidays, despite travel restrictions.
Britain and the European Union signed a Brexit trade deal late on Thursday, preserving several trade provisions for both sides and limiting the scale of disruption resulting from the divorce.
“With this announcement, our government will ensure Canadian businesses that trade goods with the United Kingdom continue to have preferential access,” Freeland said in a statement.
FP - Erik Wasson, Laura Litvan and Billy House (2020-12-23)
The Senate followed the House late Monday in passing by overwhelming margins the US$2.3 trillion bill, just hours after lawmakers got their first look at the 5,593 pages of text. The White House has said President Donald Trump will sign it.
“I still have a picture, I’ll go get it afterwards,” said Macklem, who was the Finance Department’s top international official at the time. “I keep this picture of the beginning of the meeting. I’m in the picture and I look terrible. I was pretty stressed. I keep that in my office as a little reminder of that feeling in the pit of your stomach.”
The Asian Infrastructure Investment Bank plays a useful role in burnishing China’s image, its president acknowledges, even as he warns that Canada would hurt itself by leaving an international institution that critics have called a tool of Beijing.
“We do have very low interest rates, and we have given extraordinary forward guidance,” Tiff Macklem, the current Bank of Canada governor, said in an exclusive year-end interview on Dec. 16. “That’s partly how monetary policy works. It stimulates, lowers the cost of credit, so you’re probably going to see more spending on things that people use credit for. Housing would be high on that list.”
In the end, the dollar played only a minor role in the Poloz story. He devoted a speech to the subject in 2014, but the currency rarely featured in interest-rate discussions. In his final interview as governor last May, Poloz said he thought that he had been unfairly tagged as being “soft on the dollar,” when all he was doing was trying to keep deflationary forces at bay.
Bloomberg - Saleha Mohsin and Liz McCormick (2020-12-21)
The greenback’s tumble this year -- it’s heading for the second-biggest drop in the past decade and a half -- has already stoked foreign policy makers’ concerns, thanks to the competitive advantage it gives the U.S. Even a tacit endorsement of a weakening dollar could spur tensions with trading partners.
The Bank of Canada may be forced to wind down its bond purchases next year because its holdings are getting too large, but don’t expect the move to drive up domestic borrowing costs.
A QE taper likely won’t lead to “severe” tightening of financial conditions, particularly if other larger central banks maintain their bond-purchasing volumes, the
G&M - GUY FAULCONBRIDGE AND KATE HOLTON (2020-12-18)
British Prime Minister Boris Johnson’s office said on Thursday that trade talks with the European Union were in a “serious situation” and that no agreement would be reached unless the bloc changed its position substantially.
OSFI hosted the 2020 Risk Management Webcast for Deposit-Taking Institution on November 23, 2020. Please click the timestamps below to jump to specific topics in the video:
G&M - HOWARD SCHNEIDER, ANN SAPHIR AND JONNELLE MARTE (2020-12-17)
“The parts of the economy that are weak are the service-sector businesses that involve close contact,” such as restaurants and the travel industry, Powell said in a news conference following the two-day policy meeting.
“Near term, rising COVID-19 infections will dampen growth and could even deepen our economic hole,” Mr. Macklem said in a speech via video-conference Tuesday to the Greater Vancouver Board of Trade.
Some experts believe the Bank of Canada and its counterparts in the United States and Europe have embarked on a course of debt monetization as their economies lurch from crisis to crisis. And they worry that domestic politics will make it very hard to reverse course.
“I really encourage governments around the world that have got massive deficits to really consider at this point privatizing, you know, selling operating brownfield infrastructure assets, if they can, because they’re going to get extraordinary prices for it, given the wall of money that’s interested in it, and it will help (bring down) deficits.”
In the end, the guard-rails mostly held. The Fed on Wednesday concludes the last Federal Open Market Committee meeting with Trump in the White House. The bank has avoided the sort of reputational damage suffered by many federal agencies, like the Centers for Disease Control or the Environmental Protection Agency, where politics seemed to gain a foothold over technical expertise and original mission.
Economists say the Fed may deliver fresh guidance on its asset purchases, now $120 billion a month, tying how long the buying will continue to substantial progress in meeting its goals of full employment and 2% inflation. That would be a stronger commitment than the existing pledge to maintain purchases “over coming months.”
When members of the Federal Open Market Committee convene for their final meeting of the year on Tuesday and Wednesday, the fate of the US central bank’s asset purchase programme will be in focus.
G&M - JAN STRUPCZEWSKI AND KATE ABNETT (2020-12-11)
European Union leaders unblocked on Thursday a 1.8 trillion euro financial package to help the economy recover from the pandemic-induced recession after reaching a compromise with Poland and Hungary, the chairman of EU leaders Charles Michel said.
The Bank of England took steps on Friday to keep banks lending through 2021 as Britain grapples with the COVID-19 pandemic and braces for any market disruption from a big change in the UK’s trading relationship with the European Union.
The central bank has purchased a little more than $180 billion in Government of Canada bonds since March as part of its quantitative easing, or QE, program. Over the same period, the federal government has rolled out a slew of spending programs to support businesses and consumers amid job losses tied to the Covid-19 pandemic.
Before the U.S., only five powers had enjoyed the coveted “reserve currency” status, going back to the mid-1400s: Portugal, then Spain, the Netherlands, France and Britain. Those reigns lasted 94 years on average. At the start of 2020, the dollar’s run had endured 100 years. That would have been reason to question how much longer it could continue, but for one caveat: the lack of a successor.
Governor Tiff Macklem and his deputies on the Governing Council made explicit mention of the exchange rate for the second consecutive time while updating their interest-rate stance, a signal that the dollar’s recent strength could reduce what Canada might otherwise expect to earn from exports.
The Bank of Canada today maintained its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank is maintaining its extraordinary forward guidance, reinforced and supplemented by its quantitative easing (QE) program, which continues at its current pace of at least $4 billion per week.
The Bank of Canada has now officially said it could potentially drop the benchmark interest rate below its current setting of 0.25 per cent, while emphasizing that it remains deeply skeptical of negative interest rates.
The bill is part of the National Defense Authorization Act, the annual omnibus defence bill that passed in the House of Representatives by a veto-proof margin, which means that neither the sitting nor future president can overrule it. The Senate is expected to follow.
Bank of Canada deputy governor Paul Beaudry used a key speech Thursday to defend the central bank’s quantitative easing program, seeking to dispel the notion that it is printing money to finance the federal government’s huge deficit.
“Canada’s recently released medium-term financial roadmap reinforces the likelihood of a rising public debt burden and expansionary fiscal policy without precise details of a return to a fiscal anchor and consolidation,” Fitch Ratings said in an article posted on its website on Monday.
Economists predict the central bank will restate a pledge to hold its overnight interest rate at 0.25% until at least 2023, while continuing bond purchases at the current pace of C$4 billion ($3.1 billion) per week. The bank releases its December policy decision at 10 a.m. in Ottawa.
China’s yuan weakened minutes before Wednesday’s official close, reversing an earlier gain that had pushed the currency to its strongest level in more than two years.
Bloomberg - Theophilos Argitis and Kait Bolongaro (2020-12-08)
Michael Sabia, a big-name corporate leader who has run the nation’s largest phone company and second-largest pension fund, was appointed deputy minister of finance Monday. The move formalizes the role he’s played since the early days of the pandemic as a top adviser to both Trudeau and his finance minister, Chrystia Freeland.
It also illustrates the extent to which an ambitious fiscal agenda has prevailed in Trudeau’s administration. Sabia has called for spending taps to remain open and isn’t too worried about higher debt. His ambitions are to reshape the economy after the pandemic, in line with the prime minister’s plan to put the state at the center of any recovery.
“If I had a choice between dealing with the deficit of weak infrastructure, or the deficit of a digital divide, or the deficit of significant social inequality, those are all deficits that matter and I think addressing those right now is at least as important as managing our fiscal situation,” Sabia said in a September interview with TVOntario.
Brexit and the coronavirus pandemic have reinforced the need to solidify the single currency’s foundations, said the president of the Eurogroup of finance ministers, who will seek to revive the bloc’s long-stalled banking union project this week.
Canada’s banking regulator has chosen to leave a key threshold for large banks’ capital reserves unchanged, even as it warned that the country’s financial system still has vulnerabilities and faces uncertainty amid the coronavirus pandemic.
Canadian Underwriter - David Gambrill (2020-12-07)
Canada’s solvency regulator has come out with a softer version of its proposed rule regarding the property and casualty insurance industry’s issuance of high-limit policies.
Decisions on the calibration of the buffer are based on OSFI supervisory judgement, informed by its monitoring and analytical work on a range of vulnerabilities, and are made in consultation with OSFI's federal financial regulatory partners.
The fiscal update does not say by how much each dollar of government spending increases GDP but during the pandemic it must be low. Household incomes rose by 13 per cent during the downturn, more than in any other OECD country (even the U.S. during its election year). But despite all this new money, households did not spend more. Instead, our household saving rate jumped by 23 per cent of personal disposable income, more than in any other country. The update spins this embarrassing fact by saying Canadians were getting a “down payment” now to spend later.
The largest U.S. bank lobby group is spending $1 million on television ads to boost Republican Senator David Perdue, in a bid to ensure the Senate remains in Republican hands after Georgia runoffs in January, according to federal filings.
More than 400 lawmakers from 34 countries have signed a letter to Amazon.com Inc boss Jeff Bezos backing a campaign that claims the tech giant has “dodged and dismissed … debts to workers, societies, and the planet,” organisers said.
Finance Minister Chrystia Freeland is looking outside her own department for the new second-in-command who will help steer Canada’s economy through the pandemic and the $100-billion stimulus spending campaign that will follow.
Under its yield curve control policy, the BOJ seeks to keep short-term interest rates at around -0.1% and 10-year bond yields around zero as part of efforts to revive the economy with low borrowing costs.
Statistics Canada data show that primary household income, or private-sector earnings, barely dropped between the first quarter of 2020 and third quarter, falling by just 1 per cent, or $15.2-billion to $1.52-trillion. But transfers from government, which include existing programs such as employment insurance plus new coronavirus-era programs, made up for that drop many times over. Those transfers rose by $103.8-billion from the first quarter to the third quarter, meaning that the government effectively gave households nearly $7 for each dollar of lost private-sector income. Those figures are seasonally adjusted and stated on an annualized basis.
In Manitoba, for example, businesses are permitted to sell only essential items such as food and pharmaceuticals regardless of the full inventory they carry, she said. Meanwhile, Ontario’s restrictions for the hot zones Toronto and nearby Peel permit big-box businesses to be fully open as long as they also sell some items deemed essential.
Governor Tiff Macklem brushed off accusations the Bank of Canada is financing Justin Trudeau’s deficits and fueling inflation risks, even as he acknowledged there are limits to how much government debt it can buy.
Under OTIP, a whistleblower program launched in 2014, the CRA provides financial rewards to individuals who come forward with information related to major international tax evasion and aggressive tax avoidance that lead to the collection of taxes owing.
“We already see some stimulus bleeding into next year, with current announcements bringing the deficit to at least $90 billion in 2021-2022,” it said, noting that extensions of existing government supports could add $40 billion to deficits through the end of 2021 “even before new spending announcements.”
The short-term stimulus package is valued at $70 billion to $100 billion over roughly three years. The government says the stimulus spending — intended to build a greener, more inclusive, more innovative and competitive economy — will launch after a vaccine is distributed and life begins to return to normal.
Provincial finance ministers have quietly prodded Finance Minister Chrystia Freeland to pause planned increases in premiums workers and businesses pay into the Canada Pension Plan.
Reuters - Pete Schroeder, Michelle Price, Katanga Johnson (2020-11-27)
The CFPB director is a critical role for progressives such as Senator Elizabeth Warren who believe the agency can help tackle wealth inequality and racial injustice. A U.S. Supreme Court ruling in June handed Biden the power to fire Republican President Donald Trump’s CFPB director, Kathy Kraninger, and many policy experts expect the former vice president to quickly remove her after he takes office on Jan. 20.
In parliamentary testimony on Thursday, Macklem faced questions from opposition Conservative Party lawmakers over the central bank’s quantitative easing program, which has been used to buy nearly C$200 billion ($154 billion) in federal government bonds since April.
Canada’s banking regulator is cautioning against lifting restrictions on banks’ dividend payments and share buybacks too soon as cases of the novel coronavirus spike again.
In nominating Janet Yellen to become his Treasury secretary, president-elect Joe Biden has opted for a steady hand and consensus-builder to steer U.S. fiscal policy just as economists increasingly warn the country is poised to slip back into recession.
Signs of overwhelming financial strain are few, and the risk of a wave of consumer defaults seems low, Deputy Governor Toni Gravelle said in remarks via video conference to the Autorite des marches financiers. Almost all of the households with expired debt deferrals have resumed repayments, and government measures are helping businesses in many sectors manage cash flows, he said.
Emily O’Reilly, the EU’s independent ombudsman, on Wednesday said the European Commission’s decision to give the world’s largest fund manager a contract worth €280,000 had exposed the weakness of Brussels procedures on conflicts of interest when hiring from the private sector to advise on major policy areas.
In the first quarter that was reported after the onset of the pandemic, we hit what I like to call the “downturn trifecta”: [1] Loan growth rose (supporting the economy). [2] Loan loss provisions went up (because of the downturn). And [3] market participants were unconcerned by the decline in bank capital levels. This was a textbook example of how the capital regime should work during a downturn, one where the banking system is able to absorb shocks rather than forced to amplify them.
The federal government has spent nearly $5-million on outside consultants to set up a COVID-19 emergency support program for large companies that has delivered just two loans since launching six months ago.
Finance Minister Chrystia Freeland told lawmakers Monday that her department will release new deficit projections on Nov. 30. The economic statement could also include details of new permanent spending on long-term priorities including childcare.
Reuters - Jeff Mason, Trevor Hunnicutt (2020-11-24)
After weeks of waiting, President Donald Trump’s administration on Monday cleared the way for President-elect Joe Biden to transition to the White House, giving him access to briefings and funding even as Trump vowed to continue fighting the election results.
Reuters - Trevor Hunnicutt, David Lawder (2020-11-24)
President-elect Joe Biden is expected to nominate former Federal Reserve Chair Janet Yellen as U.S. Treasury secretary, breaking a 231-year gender barrier and putting a seasoned economist and labor market expert in charge of leading the country out of the steepest downturn since the Great Depression.
Bloomberg - Joe Mayes, Kait Bolongaro, Tim Ross, and Shelly Hagan (2020-11-19)
The agreement would be a major boost to U.K. Prime Minister Boris Johnson in his efforts to plot a new course for Britain as a global trading nation outside the EU. An announcement is expected within days, according to people familiar with the matter who spoke on condition they not be identified.
Canada's top central banker is making a plea for the country to more quickly address the impacts of climate change to avoid any economic ripple effects on households and businesses.
Bloomberg - Chiara Albanese and Sonia Sirletti (2020-11-18)
The government decided not to extend into 2021 a tax benefit introduced earlier this year to facilitate the disposal of non-performing loans held on the balance sheets of Italian banks. Lenders and customers have been severely hit by the pandemic crisis.
Facing parliamentary pressure to stand up to Beijing’s use of covert agents to target Canadians, Foreign Affairs Minister François-Philippe Champagne says Ottawa is planning new measures to crack down on these kinds of intimidation tactics.
Ms. Wilkins sat down for an interview via video conference just days after she had informed the bank’s board that she would step down Dec. 9, five months before the end of her seven-year term – ending a nearly 20-year career at the central bank.
The most skittish currency traders will have taken note. The Bank of Canada has only mentioned the dollar in nine of its 23 policy statements since the start of 2018, so policy-makers might have been sending a signal that they thought the dollar was getting too strong: a form of stimulus known as “jawboning” or “jaw-jaw” that has been known to to move markets in favourable directions.
The Bank of Canada and the Office of the Superintendent of Financial Institutions (OSFI) today announced plans for a pilot project to use climate-change scenarios to better understand the risks to the financial system related to a transition to a low-carbon economy. A small group of institutions from the banking and insurance sectors will participate voluntarily in the project.
The ECB took a major step last month by launching a public consultation that runs until the middle of January. Policy makers intend to decide around mid-2021 whether to initiate a full-fledged project and prepare for a possible launch.
The Bank of Canada’s top deputy said the country is likely to come out of the pandemic with a lower outlook for potential growth and permanent labor force scarring, and that conventional wisdom must be challenged to find solutions.
Speaking at an online conference held by the European Central Bank, Powell, Bank of England governor Andrew Bailey and European Central Bank head Christine Lagarde emphasized the longer-term threat to the economy from the pandemic while welcoming the preliminary results showing a vaccine by BioNTech and Pfizer was highly effective.
“Our analysis indicates that maintaining current fee levels and leveraging our cash position will ensure that we can continue to deliver on our priorities,” the OSC said.
The European Union called on Beijing on Thursday to immediately reverse new rules to disqualify elected legislators, saying the decision was a “severe blow” to the former British colony’s autonomy.
The Bank of Amsterdam is to central banking history what Little Richard is to rock ‘n’ roll. While the public might like to think it was Elvis or the Fab Four that invented it, the purists know they merely popularised it.
In terms of Canada’s economic recovery, Poloz said that the government’s income support programs have been critical because it’s people on the lower end of the income scale who have been hurt the worst in this crisis. He sees a K-shaped economic recovery — in which some parts of the economy bounced back, but other parts may be in serious trouble.
Citing further improvement in financial market conditions, the Bank of Canada is continuing to pull back liquidity support programs that were adopted in response to the disruptions caused by Covid-19.
Among other things, the report warned that the registry’s identification information isn’t actively verified, that the searchability and discoverability of information is “unreasonably restricted,” and that the penalties for filing false information are unlikely to serve as a meaningful deterrent.
Based on the budget officer’s calculations, the government could increase spending, reduce taxes, or a combination of the two to the tune of $19 billion and still reduce the debt-to-GDP ratio over time to pre-pandemic levels.
The federal Liberals are embracing support for Canada’s airlines after being told domestic carriers are losing their most lucrative line of business – international flights – to government-backed rivals.
Canadian business leaders are preparing to navigate political gridlock south of the border, with the U.S. Congress appearing to split between the Democrats and Republicans, reducing the likelihood of a strong policy shift to the left.
Democrat Joe Biden moved closer to victory in the U.S. presidential race on Thursday as election officials tallied votes in the handful of states that will determine the outcome and protesters took to the streets.
With Carolyn Wilkins moving on when her term ends May 1, the Ottawa-based central bank published the job posting Wednesday. The search for her replacement will be undertaken by recruiting firm Boyden.
Bloomberg - Why Central Bankers Got Serious About Digital Cash (2020-11-05)
What central banks once sneered at, they’re now scrambling to master. Back when Bitcoin, the world’s first cryptocurrency, was seen as the province of anarchists and drug dealers, it was easy for the world’s central bankers to keep their distance. That changed in a hurry after Facebook Inc. proposed creating its own digital currency, Libra. Suddenly, the concept was seen as both practical and as a potential threat to existing monetary regimes. The central banks of China, the euro area, the Bahamas and others have been experimenting in the field, while others, including the U.S. Federal Reserve and Bank of England, are conducting research but not plunging in, at least for now.
G&M - HOWARD SCHNEIDER AND ANN SAPHIR (2020-11-05)
The Federal Reserve kept its loose monetary policy intact on Thursday and pledged again to do whatever it can in coming months to sustain a U.S. economic recovery threatened by a spreading coronavirus pandemic and facing uncertainty over a still undecided presidential election.
Investment Executive - Martin Crutsinger (2020-11-05)
The Fed announced no new actions after its latest policy meeting but left the door open to provide further assistance in the coming months. The central bank again pledged to use its “full range of tools to support the U.S. economy in this challenging time.” The economy in recent weeks has weakened after mounting a tentative recovery from the deep pandemic recession in early spring.
The Office of the Superintendent of Financial Institutions (OSFI) continues to actively monitor the evolving pandemic and assess its impacts on the financial and operational capacity of deposit-taking institutions, or DTIs.
The United States is already on a perilous fiscal path, with unending deficits forecast and the national debt headed to its highest level in the history of the republic by the end of the decade.
Those comments will have bothered a lot of people. Poilievre politicized a Crown institution that worries a great deal about its independence from the whims of partisan politics. Much of its credibility relies on the assumption that policy-makers will set interest rates based on economic conditions, not the electoral needs of their political masters.
This video is intended to give viewers an understanding of the economic ideas behind Canada's potential housing bubble. This video also explains why Siddal, President and CEO of the CMHC, was likely pushed from his post.
This is the view of several former chairs of the Ontario Securities Commission and the current head of the province’s modernization task force, on the future of the two self-regulatory organizations (SROs) that oversee Canada’s investment advisory industry.
When South African president Cyril Ramaphosa recently extolled in parliament his government’s provision of R500bn ($31bn) to steer the nation’s battered economy through the pandemic, there was some awkward fine print for the country’s banks.
Investors are beginning to question how long the Bank of England can rely on bond buying as its main tool for stimulating the UK economy. Markets are braced for the BoE to announce a fresh round of quantitative easing at its policy meeting on Thursday, with many economists pencilling in an extra £100bn of purchases on top of the £300bn announced so far this year, to tackle the economic impact of a resurgence of Covid-19.
First, the good news. The Finance Minister of Canada is not, contrary to rumours, an advocate of Modern Monetary Theory. Neither is she a disciple of Ayn Rand.
On October 8, 2020, the SBA and Treasury issued an Interim Final Rule eliminating forgiveness reductions resulting from either a reduction in a borrower's number of full-time equivalent employees or individual employee pay if the borrower's loan (when aggregated with PPP loans to any of its affiliates) does not exceed $50,000.
Despite these limitations, the Buffalo Party finished third overall in the popular vote and scored strong second-place victories in four bedrock Conservative ridings.
A charter unveiled Thursday by a newly created branch of the Ontario Securities Commission lays the groundwork for new forms of capital raising, more avenues for innovators and a reduced regulatory burden.
The Bank of Canada is setting up to run a high-pressure economy until at least 2023, a delicate operation that will require lots of tinkering along the way.
In an interview with Reuters published Thursday, Bank of Canada (BoC) Governor Tiff Macklem said his institution is working with G7 member states on its plans for a central bank digital currency (CBDC).
The last monetary report in July was a grim synopsis of looming economic decline. To quote one passage: “The large declines in both demand and supply are extraordinary. Over a longer horizon, the pandemic could cause large and lasting changes in consumer preferences and other sources of demand. Similarly, the scope of possible structural changes to a post-pandemic economy is vast, and the timing of adjustments will remain unknowable as long as COVID-19 continues to be a threat.”
The Bank of Canada said it will reduce its Canadian government bond purchases to $4-billion a week while shifting more of its purchases to longer-term bonds, as the bank recalibrates its quantitative easing to deliver stimulus to an economy that it cautions is headed into a slowing and less certain phase of recovery.
The Bank of Canada’s monetary stance was little changed following today’s announcement except for an adjustment to its bond-buying program. The Bank is focusing on longer-term bond maturities, which have more infl uence on household and business borrowing costs, than shorter-term bonds and treasury bills. In addition, their weekly bond purchases will be reduced to four billion per week from fi ve billion. The Bank purchased shorter-term fi nancial assets in the early stage of the pandemic to provide liquidity to the market but that is no longer required and the Bank’s shift to longer-term bonds is intended to support and promote economic growth.
Canadian news publishers want government approval to seek compensation from digital giants such as Facebook Inc. and Alphabet Inc.'s Google for using their content, including the power to bargain as an industry to negotiate the terms.
Many executives see the Democratic nominee as less adversarial than Sanders or Warren, and less unpredictable than Trump. Yet political attitudes vary considerably by industry and type of business.
These are tough times in the real estate market. The Covid-19 crisis has hit asset values, particularly commercial real estate in cities such as New York. Investors holding debt with upcoming maturities are preparing for tricky negotiations with their debtors. The negotiations will be trickier if the debtor is the president of the United States. Virtually all of Donald Trump’s debt — there is at least $1.1bn of it, according to his government financial disclosures and other documents — is backed by real estate, mostly linked to a small number of buildings and golf courses that form the core of the Trump business empire. About $900m of that debt will come due in Mr Trump’s second term, should he win the November 3 presidential election.
Balancing a stronger-than-expected economic rebound with a second wave of the COVID-19 pandemic, the Bank of Canada looks unlikely to make any dramatic moves in this week’s monetary policy decision. But the financial markets will nevertheless be looking for hints on where the central bank will take its highly stimulative policy position from here.
Market operation data from the Bank of Canada show benchmark bonds — those currently being sold by the government, as opposed to older debt — are making up a growing share of the central bank’s secondary market purchases.
In a research note, NBF said the bank’s policy rate is expected to remain at its rock-bottom level of 0.25% at its rate decision on Wednesday, and likely until 2023 at least.
That appears to be the case here in Canada, where the Liberal minority government — backstopped by the NDP — is looking to implement massive, costly programs including a national daycare system, pharmacare, affordable housing and green initiatives.
Banks were big beneficiaries of tax cuts under President Donald Trump, making a reversal seem ominous. But a second look at what might happen if Biden were to win the election and Democrats were to win control of the U.S. Senate suggests the pain might not be so bad.
G&M - JASON CLEMENS AND MILAGROS PALACIOS (2020-10-22)
The federal government and several prominent economists have played down the near-term risks to federal finances. Some have actually characterized Ottawa’s financial position as basically “sound.” Such analyses are premised on questionable assumptions and ignore the country’s past experiences with perennial deficits.
The government borrowed a net 36.1 billion pounds (US$47.1 billion) in September, pushing the total for the first six months of the year to 208.5 billion pounds, the Office for National Statistics (ONS) said Wednesday. That’s the highest figure since records began in 1993.
The Liberal government’s expansive spending plans would push the federal debt burden back to the dangerous levels of the 1990s over the next decade, according to a report from one of the architects of Ottawa’s successful effort to defuse Canada’s debt crisis a quarter century ago.
The Liberals are threatening opposition parties with an election if the Conservatives move ahead Tuesday with their attempt to create a special “anti-corruption” committee in the House of Commons.
G&M - MICHAEL BALSAMO AND MARCY GORDON (2020-10-20)
The Justice Department on Tuesday sued Google for antitrust violations, alleging that it abused its dominance in online search and advertising to stifle competition and harm consumers.
New research by two of Canada's most credible analytic agencies appears to prove that critics — who have complained that inflation data has been distorted by COVID-19 both here and in the U.S. — actually got it right.
The mortgage bond program accomplished this by having the central bank buy up billions of dollars worth of insured mortgages from lenders and move them on to its balance sheet, which makes it easier for lenders to go out and lend money to someone else.
The Bank of Canada’s mandate is up for renewal next year, and this time will be different. The central bank has set a new standard for how an arm’s length Crown corporation should engage with the people it ultimately serves.
Bloomberg - Kait Bolongaro and Theophilos Argitis (2020-10-19)
Justin Trudeau’s Covid-19 support programs gave Canada one of the world’s largest budget deficits, and now the prime minister is ready to test public appetite for more red ink.
The Federal Reserve and other central banks will eventually discover that breaking up isn’t easy after partnering with their governments and the financial markets to avert a pandemic-driven depression.
A group of seven central banks, including Canada’s, have issued a statement indicating they are working together on common principles and key features for a viable central bank digital currency, or CBDC.
Every five years, the Bank of Canada renews its agreement on the country’s inflation-control target. The BoC is due to announce its new framework in 2021, and this time around, it has asked Canadians for their opinions.
In a release, the bank said that while new risk-free rates (such as CORRA) are expected to become the primary financial benchmarks around the world, they are not necessarily ideal for all products, “so having robust credit-sensitive benchmarks may also be desirable,” it said.
Reality Check verdict: It's true the economy was doing well prior to the pandemic - continuing a trend which began during the Obama administration - but there have been periods when it was much stronger.
Bloomberg - Theophilos Argitis and Kait Bolongaro (2020-10-16)
Canada’s main opposition party is cautioning the central bank against financing Justin Trudeau’s spending plans beyond immediate pandemic emergency measures, thrusting the Bank of Canada into a political firestorm.
BILL CURRY AND CHRIS HANNAY - Canada Infrastructure Bank paid $3.8-million for terminations amid leadership shakeup (2020-10-14)
The Canada Infrastructure Bank paid $3.8-million in termination benefits as part of a major shakeup of the organization’s senior management, documents show.
The IMF forecasts a partial and uneven recovery in 2021, with global growth expected to reach 5.2 per cent, but warns that significant risks remain, including the resurgence of the virus.
Massive government spending to battle the coronavirus pandemic will push public debt to a record of nearly 100 per cent of global economic output this year, but the run-up may be a one-off event if growth rebounds next year, the International Monetary Fund said on Wednesday.
A Bank of Canada official says pandemic-related shifts in how people shop means central banks must speed up work on creating their own digital currencies.
“Relying on the conventional media to diffuse their message to the public can be ineffective because many households no longer read newspapers and even if they do, individuals discount reports from the news media,” the authors said in their paper.
The former governor, who stepped down from the Bank of Canada after his term ended in June and is currently a special adviser at law firm Osler, Hoskin and Harcourt LLP, cited a report on Tuesday by the International Monetary Fund that estimated Canada’s general government gross debt will rise to 115 per cent of gross domestic product this year, from 89 per cent in 2019. Policy makers don’t have much experience with such large numbers, but provided interest rates stay low, it’s more of a “debt service issue,” Poloz said.
Earlier this year, the U.S. Commerce Department issued a regulation that allows duties to be applied on imports from countries whose currencies are deemed to be undervalued. Already, with the help of a Treasury Department undervaluation finding against the Vietnamese dong, Commerce is pursuing such a case against Vietnamese tires. A Treasury finding in a Chinese tie-twist case may soon be reached. Others may be next in line.
The advanced governments of the world are conducting an extraordinary economic experiment and think there’s no cost to debt, but “it’s not going to end well”, according to the Australian’s Adam Creighton.
Britain’s government on Sunday urged businesses to prepare for the end of the Brexit transition period, saying that they need to take action whether or not a trade deal with the European Union is clinched.
G&M - HUW JONES AND WILLIAM SCHOMBERG (2020-10-12)
The Bank of England asked banks on Monday how ready they are for zero or negative interest rates, following up its announcement last month that it was considering how to take rates below zero if necessary.
Central banks set out to regulate cross-border stablecoins like Facebook’s planned Libra with a common approach on Tuesday, saying more rules may later be needed to ensure stability.
A rare regime-change in economic policy is under way that’s edging central bankers out of the pivotal role they have played for decades.
Fiscal policy, which fell out of fashion as an engine of economic growth during the inflationary 1970s, has been front-and-center in the fight against Covid-19. Governments have subsidized wages, mailed checks to households and guaranteed loans for business. They’ve run up record budget deficits on the way -- an approach that economists have gradually come to support, ever since the last big crash in 2008 ushered in a decade of tepid growth.
Bank of Canada Governor Tiff Macklem acknowledged that the central bank’s adoption of record-low interest rates to fight the COVID-19 economic crisis has elevated the country’s financial risks, warning that “the next few months will be crucial” in determining how well Canadian households and businesses weather the strains from the crisis.
A global pandemic that has crushed the economy. A stock market improbably rising in an economic downturn. Is it the job of the Bank of Canada to address this contradiction, and the inequality that arises?
G&M - Iain Withers, Anna Irrera, Tom Wilson (2020-10-08)
China is seeking to win a first-mover advantage in its efforts to develop a digital version of its currency, Japan’s top financial diplomat said on Thursday.
“As much as a bold policy response was needed, it will inevitably make the economy and financial system more vulnerable to economic shocks down the road,” Tiff Macklem said in a speech on Oct. 8.
“We are not actively discussing negative interest rates at this point but it’s in our toolkit and never say never,” Macklem said Thursday via videoconference, after a speech to the Global Risk Institute.
Starting Oct. 20, the central bank will allow buy-side firms, such as portfolio managers and pension funds, to participate in its corporate bond purchase program (CBPP).
Investment Executive - Martin Crutsinger (2020-10-07)
The Fed’s statement incorporated a policy change the central bank announced in August in which it will allow inflation to rise above its 2% target for a period of time to make up for the extended period over the past decade that annual inflation has been below the 2% target. That change is seen as allowing to keep interest rates lower for a longer period.
According to a new report from the Financial Stability Board (FSB) and the International Monetary Fund (IMF), the pandemic has created “significant challenges” for the ongoing effort to improve oversight of the global financial system — a project known as the G20 Data Gaps Initiative (DGI).
The Office of the Superintendent of Financial Institutions (OSFI) today released its Annual Report. The report covers OSFI’s activities from April 1, 2019 to March 31, 2020 and also details the progress made in delivering the first year of OSFI’s 2019-2022 Strategic Plan
The Global Risk Institute and the evolution of risks during a pandemic - Tiff Macklem, the Governor of the Bank of Canada, speaks by videoconference at the Global Risk Institute’s 10th anniversary Summit. (8:30 (Eastern Time) approx.)
Investment Executive - Christopher Rugaber (2020-10-06)
Powell said that government support — including expanded unemployment insurance payments, direct payments to most U.S. households and financial support for small businesses — has so far prevented a recessionary “downward spiral” in which job losses would reduce spending, forcing businesses to cut even more jobs.
Arguing that the Democrats, led by Speaker Nancy Pelosi, are not negotiating in good faith, US President Donald Trump has broken off talks on the new coronavirus stimulus package, saying he will pass one after he wins re-election.
FT - Nicholas Megaw, George Hammond, Matthew Vincent and Jim Pickard (2020-10-06)
The banking industry on Tuesday warned against irresponsible lending after Boris Johnson pledged to “turn generation rent into generation buy” through a big increase in low-deposit mortgages for first-time buyers.
Bank of Canada Governor Tiff Macklem shares with his counterparts in the developed world the burden of having to compensate for the failures of markets and governments.
Bank of Canada Governor Tiff Macklem warned that the spectre of rising inequality in employment and incomes poses the biggest threat to a healthy, broad-based recovery from the COVID-19 crisis, as the economy stages what he called an “uneven” rebound from its pandemic lows.
It’s funny the various ways expectations can shrink. Here were Justin Trudeau and Catherine McKenna announcing a new plan for the Canada Infrastructure Bank, which is a novel organization designed to turn $35 billion from the federal government into widespread confusion and apathy.
The throwback game, along with the Bank of Jamaica’s reggae music videos and the European Central Bank’s podcast series, is an example of how global central banks are getting creative in delivering their messages directly to the public they serve.
Tiff Macklem, the Bank of Canada’s new Governor, knows that his reputation for cool in the face of a crisis was one of the things that won him the job. He earned it in the trenches of the previous global financial crisis, where, as part of the country’s inner circle dealing with the emergency, his clear thinking and international Rolodex helped safely steer Canada’s economy and financial system from potential disaster.
Judging from Finance Minister Chrystia Freeland’s Sunday interview on Global TV, I suspect she did not have a good week. She was stuck defending the throne speech’s breathtaking permanent spending plans. Her replies, almost refuting the Liberal promises, failed to allay concerns over the growing mountain of debt and taxes implied by the burgeoning federal budget.
Reuters - Stanley White, Noel Randewich (2020-09-30)
Many investors view Biden as more likely to raise taxes, and see a second term for Trump, who favors tax cuts and deregulation, as better for the overall stock market. At the same time, a Trump win could spark concerns over ramped up tensions between Washington and Beijing.
The U.S. Federal Reserve will curb big bank capital distributions through the end of the year, meaning the likes of JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and Bank of America Corp. will be barred from share buybacks and will have to cap dividends.
On Aug. 27, the U.S. Federal Reserve Board announced an important modification of its monetary policy framework, moving towards “average-inflation targeting” (AIT). As the Fed’s announcement said: “following periods when inflation has been running persistently below two per cent, appropriate monetary policy will likely aim to achieve inflation moderately above two per cent for some time.” The obvious question for Canadian policy-makers is whether the Bank of Canada should follow suit. Our answer is: Perhaps, but the bar for changing the policy regime should be set high.
The U.S. entered the Great Recession with a lower jobless rate — five per cent in January, according to the Bureau of Labor Statistics, compared with 5.8 per cent in Canada, according to Statistics Canada’s comparable measure of unemployment — but fortunes reversed in June, as the global financial system started to tremble.
This reform agenda is made up of five inter-related areas: first, building more resilient financial institutions; second, ending too-big-to-fail; third, making derivatives markets safer; fourth, enhancing resilience of non-bank financial intermediation; and fifth, making progress in other areas, such as the rollout of new accounting standards for expected credit losses and a focus on audit quality.
Proponents of a $22-billion railway linking Alberta and Alaska can start work on a host of Canadian and U.S. approvals it will require after Donald Trump announced that he will issue a presidential permit allowing the border crossing.
Canadian media groups say they are cautiously optimistic after the Liberal government pledged in Wednesday’s Throne Speech to make internet giants pay for content they use from local newspapers, broadcasters and other creators such as musicians.
Even the deficits are downplayed on the grounds that with interest rates near zero, the cost of raising total government debt to $1.2 trillion can be kicked down the road. Tomorrow is another day, when the debt can be paid off as the economy blossoms from massive distributions of government fertilizer.
As Justin Trudeau prepares to reveal his new policy agenda, credit rating companies and investors including BlackRock Inc. are looking for his plan for pulling Canada out of a record borrowing binge.
The government forecast in July the country’s fiscal deficit will hit $334 billion or 15.9 per cent of gross domestic product by March. Yet, the economy has recovered around two-thirds of jobs lost at the height of the pandemic’s economic impact in March and April while reports show improving retail sales and robust housing market in most regions.
Wilkins, who had been elevated from the rank of adviser to second-in-command two years earlier, delivered the opening statement at the central bank’s quarterly press conference as Stephen Poloz, the governor, sat quietly by her side.
More than 1,200 restaurants have banded together to ask Ottawa for more robust and long-term pandemic programs, including wage subsidies and rent relief, in next Wednesday’s Speech from the Throne, as they repeat a warning that three in five Canadian restaurants could close for good this fall.
Prime Minister Justin Trudeau is set to unveil a new plan to try to contain the spread of Covid-19 and recharge Canada’s pandemic-battered economy, according to a senior government official.
The broad themes in this week’s so-called Throne Speech -- which outlines his government’s priorities -- will be a focus on the immediate task of tackling the coronavirus, a medium-term commitment to support Canadians through the pandemic and a “resiliency agenda” to spur recovery and reconstruction.
Trudeau’s agenda won’t establish budget targets, which will be left for Finance Minister Chrystia Freeland to detail later this year in a fiscal update, the official said, speaking on condition they not be identified because the document isn’t yet public.
Wednesday’s speech is one of the most anticipated in Trudeau’s five years in power, with questions mounting over how his governing Liberals plan to navigate their next policy steps amid surging Covid-19 case numbers and soaring budget deficits.
European banks have loaded up on more than €200bn of their own governments’ bonds since the start of the Covid-19 pandemic, in a move that could reawaken fears about the sector’s growing stockpiles of risky sovereign debt.
The US Federal Reserve is considering whether to extend restrictions on dividends and share buybacks that it imposed on large banks after determining that the pandemic could trigger up to $700bn in losses for the lenders. The US central bank had acted in June to ban share buybacks by the banks and cap their dividends for the third quarter. It said at the time that the large banks were “sufficiently capitalised” but that “heightened economic uncertainty” meant they should act “to preserve their capital levels in the third quarter”.
The Federal Reserve will analyze large banks’ ability to withstand two coronavirus-related recession scenarios as part of a second round of stress tests later this year, the central bank said.
The U.S. Federal Reserve adjusted its inflation target to seek price increases above two per cent annually, a move that will likely keep interest rates low for years to come.
“With PM Johnson likely to continue his high-stakes negotiating strategy, we no longer think a deal can be struck before year-end. We now see an 80% probability of a No Deal,” they said in a note.
Reuters - Leika Kihara, Tetsushi Kajimoto (2020-09-17)
The Bank of Japan kept monetary policy steady on Thursday and slightly upgraded its view on the economy, suggesting that no immediate expansion of stimulus was needed to combat the coronavirus pandemic.
Bloomberg - Nicholas Comfort and Alexander Weber (2020-09-17)
The coronavirus pandemic “has resulted in an ongoing need for a high degree of monetary policy accommodation, which in turn requires the undeterred functioning of the bank-based transmission channel of monetary policy,” the Governing Council said in an opinion laying the ground for the decision.
Carolyn Wilkins, the highest-ranking woman in the Bank of Canada’s history who was passed over for the top job of governor this year, has decided to leave the bank when her term as senior deputy governor ends next May.
Canada this week will unveil the retaliatory measures it’s taking against the United States after President Donald Trump slapped tariffs on Canadian aluminum in August.
For the second time in two months, the Bank of Canada has slashed its buying of federal government treasury bills and similar short-term provincial debt as it continues to scale back some of the emergency market supports it put in place to lean hard against the COVID-19 crisis.
Bank of Canada Governor Tiff Macklem last week provided a further illustration of the disturbing mission creep under way at the central bank by wading into the political debate over income inequality.
Many economists, including myself, believe that it is time to broaden the Bank of Canada’s mandate to include the pursuit of maximum levels of employment or full employment. It’s not a new idea. Australia, the United States and New Zealand have legislated that the mandate of their central banks is both price stability and full employment.
“Confidence in the private sector rests to a very large extent on confidence in fiscal policies,” Ms. Lagarde said in a speech. “Continued expansionary fiscal policies are vital to avoid excessive job shedding and support household incomes until the economic recovery is more robust.”
Canada’s export bank says it will not disclose the findings of an internal review of business dealings by Paul Lamontagne, chief executive of its development finance subsidiary, who left last week after less than three years in the post.
The prospect of a Joe Biden presidency — or, more to the point, a Democratic sweep of the presidency, the House and the Senate — should worry executives who run banks and anyone who invests in them.
The Bank of Canada plans to maintain extraordinary stimulus for as long as needed to help the nation’s economy fully recover from the crisis, Governor Tiff Macklem said.
A high-profile charity that spawned a political uproar in Canada after Prime Minister Justin Trudeau’s government put it in charge of a nearly C$1 billion program for student pandemic aid has decided to shut down.
In a decision Wednesday from Ottawa, policy makers led by Governor Tiff Macklem held the bank’s benchmark rate at 0.25% and said they’ll leave it unchanged until economic slack is absorbed so that the 2% inflation target is “sustainably achieved.” The central bank also retained a pledge to buy government bonds at the current pace and maintain extraordinary monetary policy stimulus throughout what it calls the recuperation phase of the recovery.
Bank of Canada Governor Tiff Macklem warned that the spectre of rising inequality in employment and incomes poses the biggest threat to a healthy, broad-based recovery from the COVID-19 crisis, as the economy stages what he called an “uneven” rebound from its pandemic lows.
The Bank of Canada will probably brush off the economy’s stronger-than-expected rebound and stick to its narrative of a long and bumpy recovery that will require extraordinary support for years to come.
Correction of an error in U.S. stress tests has produced modest reductions in capital requirements for two big banks — Goldman Sachs Group, Inc. and Morgan Stanley.
Italian Economy Minister Roberto Gualtieri has signed off on a government decree listing options to sell Italy’s controlling stake in Monte dei Paschi di Siena, two sources close to the matter told Reuters.
Reuters - Balazs Koranyi, Leika Kihara (2020-09-07)
The U.S. Federal Reserve’s landmark shift to a more tolerant stance on inflation will be a drag on the dollar for years and will raise hard questions about the role of central banking, challenging policymakers from Frankfurt to Tokyo.
UK Prime Minister Boris Johnson has warned the EU he's prepared to walk away from Brexit talks if there's no free trade deal by mid-October. Julian Satterthwaite reports.
Bloomberg - Birgit Jennen and Nicholas Comfort (2020-09-07)
Germany’s spending to counter the coronavirus crisis and modernize its economy means the country shouldn’t return to a balanced budget anytime soon, according to a senior Finance Ministry official.
Malaysia has dropped criminal charges against units of Goldman Sachs over the bank’s role in the alleged theft of billions of dollars from a government investment fund, a key step under the terms of a recent $3.9 billion settlement.
JPMorgan said there was about a one third chance of a no-trade deal Brexit at the year end but that brinkmanship between Britain and the European Union over coming months would make it appear a much greater risk.
Wirecard had filed charges against the newspaper on suspicion of market manipulation, accusing them of cooperating with short sellers to help them to profit from share price falls after the reports on the company became public.
Companies have raised more debt in the US bond market this year than ever before, as a dash for cash during the coronavirus crisis took issuance past previous full-year totals with months left to go.
Treasury officials in Britain are pushing for tax hikes to plug holes blown in public finances by the coronavirus pandemic, two leading British newspapers said.
Today the Office of the Superintendent of Financial Institutions (OSFI) announced that it is lifting the temporary freeze on portability transfers for private pension plans. As well, OSFI is gradually phasing out the special capital treatment of loan and insurance premium payment deferrals that was provided to banks and insurers at the start of the global pandemic.
Canada’s statistical agency is paying close attention to the “pot of cash” that Canadians have saved up amid the COVID-19 pandemic as it looks to understand who is saving and how that money may contribute to the shape of the recovery.
A major global credit rating agency is issuing a new warning about federal debt that it says may become more difficult to tackle once the pandemic passes.
Reuters - Linda Sieg, Kiyoshi Takenaka (2020-08-28)
Prime Minister Shinzo Abe, Japan’s longest-serving premier, announced his resignation because of poor health on Friday, ending a stint at the helm of the world’s third-biggest economy in which he sought to revive growth and bolster its defences.
“We have FTAs and he also tackled a lot of difficult problems. Just thinking about relations with China, relations also with Russia, and also the difficult relationship with the U.S. at least since Trump came into power.
Bloomberg - Craig Torres, Christopher Condon, and Steve Matthews (2020-08-28)
Following a more than yearlong review, Powell said Thursday that the Fed will seek inflation that averages 2% over time, a step that implies allowing for price pressures to overshoot after periods of weakness. It also adjusted its view of full employment to permit labor-market gains to reach more workers.
For almost three decades, the Bank of Canada has conducted monetary policy with the singular goal of keeping inflation low and stable. But that may soon change.
The second-in-command at the Bank of Canada said Wednesday that any changes to the underpinning of its monetary policy will be judged against how they affect the distribution of income and wealth in this country.
Reuters - Susan Heavey, Lawrence White, Anne Marie Roantree (2020-08-26)
Pompeo cited reports of Hong Kong-based executives at Next Media being unable to access their HSBC bank accounts and said the bank was “maintaining accounts for individuals who have been sanctioned for denying freedom for Hong Kongers, while shutting accounts for those seeking freedom.”
Federal Reserve Chair Jerome Powell has been too effective. His pledge to purchase corporate debt, including some with a junk credit rating, has boosted bond and equity prices since March, despite lousy economic projections. Backstopping asset prices is the unspoken precept that underlies the new policy framework he will soon unveil.
The Federal Reserve looks likely to keep short-term interest rates near zero for five years or possibly more after it adopts a new strategy for carrying out monetary policy.
FT - James Politi in Washington and Chris Giles (2020-08-26)
Central bankers’ annual gathering at the Rocky Mountain resort of Jackson Hole in late August has often served as a crisis-fighting forum — from the currency meltdowns of the 1990s to the Great Recession a decade ago.
“Monetary policy is ill-equipped to deal with sector-specific issues. We need to take them into account in our monetary policy decisions, but our focus must be on the macro economy to support sustainable growth and price stability,” Wilkins said, according to the prepared text of her opening remarks.
With a series of executive orders, US president Donald Trump has quickly changed the digital regulatory game. His administration has adopted unprecedented sanctions against the Chinese technology group Huawei; next on the list of likely targets is the Chinese ecommerce group Alibaba.
Investment dealers who sell both mutual funds and securities could see industry savings of nearly half a billion dollars over a decade if Canada’s self-regulatory organizations were merged into a single entity.
The last time that happened, the central bank only made a half-hearted effort to involve the public, dispatching a deputy governor to give a speech on the subject in November 2014, and then barely mentioning it again until October 2016, when Stephen Poloz, then governor, and Bill Morneau, then finance minister, announced they were re-upping Canada’s approach to monetary policy without any changes.
Although Canada released some documents requested by Meng and her team, lawyers for the Canadian attorney general declined to release all of the documents, claiming that some would threaten national security if disclosed.
O'Toole claimed victory after taking support from Leslyn Lewis, who finished with a surprisingly strong performance but dropped off on the second ballot. Derek Sloan dropped off after the first ballot.
The regional branch of West Africa’s BCEAO central bank has reopened in Mali for the first time since a military coup last week, Hamadoun Ba, the president of Mali’s banking lobby, told Reuters on Monday.
The coming mortgage-deferral cliff has received lots of attention since Canada Mortgage and Housing Corp. flagged the threat in the spring. But there also are approximately one million Canada Student Loans borrowers who had their repayments and interest on loans worth more than $11 billion automatically paused by the federal government from March 30 to Sept. 30, when forecasts suggest the economy will still be struggling.
BIS - Raphael Auer, Giulio Cornelli and Jon Frost (2020-08-24)
Central bank digital currencies (CBDCs) are receiving more attention than ever before. Yet the motivations for issuance vary across countries, as do the policy approaches and technical designs. We investigate the economic and institutional drivers of CBDC development and take stock of design efforts. We set out a comprehensive database of technical approaches and policy stances on issuance, relying on central bank speeches and technical reports. Most projects are found in digitised economies with a high capacity for innovation. Work on retail CBDCs is more advanced where the informal economy is larger. We next take stock of the technical design options. More and more central banks are considering retail CBDC architectures in which the CBDC is a direct cash-like claim on the central bank, but where the private sector handles all customer-facing activity. We conclude with an in-depth description of three distinct CBDC approaches by the central banks of China, Sweden and Canada.
The comfort zone the bank sets for its inflation target will help determine what happens to its key policy interest rate, which can affect the rates charged for mortgages and loans.
Bureaud was most recently working as a financial industry expert at the World Bank, helping countries raise their regulatory standards, a release from FAIR said. Previously, he held a number of roles at the OSC, including senior legal counsel and director of the regulator’s Office of Domestic and International Affairs.
G&M - PATRICK BRETHOUR AND ADAM RADWANSKI (2020-08-23)
After she was announced as Bill Morneau’s replacement on Tuesday, Ms. Freeland signalled in very broad terms what sort of economic recovery she hopes to help steer – telling reporters that it needs to be “green,” “equitable,” “inclusive” and focused on “jobs and growth.”
New York City faces a $9 billion deficit over the next two years, high levels of unemployment and the prospect of laying off 22,000 government workers if new revenue or savings aren’t found in the coming weeks.
Minutes from the Federal Reserve’s latest policy meeting are likely to shed more light on how central bank officials will wrap up their yearlong strategy review by effectively abandoning their past practice of pre-emptively lifting interest rates to head off higher inflation.
Having clearly lost the support of the prime minister, former finance minister Bill Morneau accepted the inevitable, informing the nation Monday evening he was leaving his job in order to campaign to become head of the OECD. Morneau’s obvious legacy is one of recurring deficits, both ethical and financial. His most enduring impact, however, may be installing Tiff Macklem as Governor of the Bank of Canada.
With changing technology, wind and solar are slowly becoming competitive with other sources of power. Unfortunately, the previous government’s obsessive pursuit of them as mainstream electricity resources resulted in long-term financial commitments at well above market prices. Nuclear power, which supplied 60 per cent of Ontario’s electricity last year, cost 8.3 cents per kilowatt (kWh) hour, while hydro, representing 25 per cent of the total, cost 6.1 cents. The cost of wind and solar averaged 13.5 and 42.0 cents per kWh, respectively.
Bloomberg - Kait Bolongaro, Theophilos Argitis, Erik Hertzberg, and Shelly Hagan (2020-08-20)
In Freeland, Trudeau has found an ally on aggressive fiscal policy, but someone with enough political clout in cabinet to maintain discipline on how the money is spent. The former journalist has arguably been Trudeau’s most successful minister, assigned to some of the government’s toughest files such as negotiating a new North American free trade agreement with President Donald Trump’s administration. Freeland keeps her current role as deputy prime minister.
Upheaval in the federal Finance Ministry has created renewed uncertainty for business leaders awaiting the next steps in the government’s economic response to the pandemic, as control shifts to Chrystia Freeland, a close ally of the Prime Minister whose mastery of business issues is relatively untested.
Democrats formally nominated Joe Biden for president on Tuesday, vowing his election would repair a pandemic-battered America and put an end to the chaos that has defined Republican President Donald Trump’s administration.
Finance Minister Bill Morneau resigned suddenly from the Trudeau cabinet Monday evening, saying he never intended to run in the next election and that a new finance minister is needed to oversee the long-term economic recovery from the pandemic.
Canadian pension fund giant Caisse de dépôt et placement du Québec doubled its investment in Cirque du Soleil in February to increase its influence within the shareholder base, according to its chief executive who insisted there was no evidence at the time that the entertainment company was headed for a crippling shutdown.
Fraudsters exploited a security vulnerability in the Government of Canada website and took advantage of login credentials exposed through previous hacks to conduct a series of cyberattacks that compromised the personal information of thousands of Canadians, federal officials say.
Back in the city after a week in which I paid as little heed to the markets as I could, what exactly have I missed? The most startling item of economic news (a much higher U.S. inflation reading than anyone had expected) and the most startling market event (a sudden 10.2% fall for gold) tended to counteract each other. Isn’t gold supposed to benefit from higher inflation? Meanwhile, the U.S. stock market remains agonizingly close to setting an all-time high, but comically unable to get there, as yet.
A total of 5,500 CRA accounts were targeted in what the federal government described as two “credential stuffing” schemes, in which hackers use passwords and usernames from other websites to access Canadians’ accounts with the revenue agency.
Bloomberg - Theophilos Argitis and Kait Bolongaro (2020-08-17)
Multiple officials in Morneau’s finance department described how they were overruled in key debates -- how their concerns about cost or lack of analysis were ignored and how they wound up on the losing end of many policy arguments.
China’s Commerce Ministry said it would expand a pilot program for its digital currency to include a number of large cities, advancing a pioneering initiative by a major central bank to launch an electronic payment system.
Back in 2012, when he was still governor of the Bank of Canada, Mark Carney managed to irritate much of the country’s corporate elite with what many considered a tedious lecture on how to do their jobs from someone who had never himself run a business.
Ontario’s deficit will balloon to a record $38.5-billion in 2021, almost double the size predicted in March, and Finance Minister Rod Phillips declared the province is in a recession as a result of the COVID-19 pandemic.
Outgoing Conservative Leader Andrew Scheer says his replacement must quickly put together a strong team in the Commons and for the next campaign, and he’s happy to offer whatever advice needed on that score.
Reuters - Samuel Shen, Winni Zhou, Kevin Yao (2020-08-13)
“Yuan internationalisation was a good-to-have. It’s now becoming a must-have,” said Shuang Ding, head of Greater China economic research at Standard Chartered and a former economist at the People’s Bank of China (PBOC).
“Interac eâTransfer has become central to the Canadian payments system,” the Bank of Canada said in a news release. “A disruption or failure of the Interac eâTransfer system could cause a significant adverse effect on economic activity in Canada, potentially leading to a general loss of confidence in the overall Canadian payments system.”
Evan Siddall, chief executive officer at Canada Mortgage and Housing Corp., said the government-backed insurance provider has lost market share due to restrictions it imposed on high-risk borrowers earlier this summer, according to an Aug. 10 letter addressed to lenders and obtained by Bloomberg.
House-hunting Canadians saw their buying power increase this week as the benchmark five-year mortgage rate reported by the Bank of Canada fell for the third time this year, easing a key stress test faced by borrowers.
“Do you remember who replaced Wayne Gretzky when he retired?” Polozsaid during a televised event hosted by Maclean’s in April 2019. “I run into people on the street and they ask me, `Hey, how’s Mark?’” I’m like, `Great. And I’m doing OK too.’”
The U.S. budget deficit climbed to US$2.81-trillion in the first 10 months of the budget year, exceeding any on record, the Treasury Department said Wednesday.
Starting Aug. 24, the central bank will reduce the limits on non-mortgage loans and securities that can be used as collateral for its standing liquidity facility (SLF) from 100% back to pre-crisis levels by Sept. 21.
In the statement, the Prime Minister’s Office praises Morneau’s record, including his “lead role” in creating emergency aid programs to help individuals and businesses survive the economic shutdown triggered by the COVID-19 pandemic.
FP - Matthew Lombardi and Max Seltzer (2020-08-10)
It’s now widely accepted that the stall in GDP growth, real wages and overall productivity that characterized the 2010s was the unintended side effect of the U.S.-led fiscal and monetary policy bailouts of 2008 — bailouts that, to be fair, probably did prevent a second Great Depression, but whose unhealthy side effects lingered.
The Liberals are under pressure to rein in the economy after pandemic spending helped drive the projected deficit for 2020-21 to $342.2 billion — some ten times higher than expected before COVID-19 — according to a financial snapshot provided last month by Finance Minister Bill Morneau.
NY Times - Eshe Nelson and Daniel Politi (2020-08-05)
Under the agreement, creditors will be paid 54.8 cents on the dollar, according to an Argentine government official who has taken part in the negotiations who spoke on condition of anonymity to discuss private negotiations.
“The overall envelope of PEPP (Pandemic Emergency Purchase Programme) purchases is a core determinant of the ECB’s overall monetary stance,” Lane said in a blog post.
“Agence France Trésor (AFT), on behalf of the Minister of the Economy, Finance and Economic Recovery, has decided to suspend Morgan Stanley from its status of SVT (Spécialiste en Valeurs du Trésor - Primary Dealer) for a minimum period of three months, with effect from 4 August, 2020,” the AFT said late on Monday.
WSJ - Serena Ng in Hong Kong and Nick Timiraos in Washington (2020-08-04)
When the coronavirus halted the global economy in March, the U.S. central bank lent massively to counterparts abroad. The action—among its most significant expansions of power yet—cemented the dollar’s dominance.
The Bank of Canada today published its 2021 schedule for policy interest rate announcements and the release of the quarterly Monetary Policy Report. It also reconfirmed the scheduled interest rate announcement dates for the remainder of this year.
Like deers caught in the headlights, Prime Minister Justin Trudeau and his hapless finance minister Bill Morneau have attempted to deflect the blame for the WE Charity scandal to their senior civil service. Most pundits derisively scoffed at that effort. But, just maybe, they have a point.
Australia will force U.S. tech giants Facebook Inc and Alphabet Inc’s Google to pay Australian media outlets for news content in a landmark move to protect independent journalism that will be watched around the world.
In its statement announcing the policy decision, the Federal Open Market Committee repeated prior language that the pandemic “poses considerable risks to the economic outlook over the medium term” and that the federal funds rate would remain near zero “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”
G&M - ANN SAPHIR AND HOWARD SCHNEIDER (2020-07-30)
The surge in U.S. coronavirus cases and the restrictions aimed at containing it have begun to weigh on the economic recovery, the head of the Federal Reserve said on Wednesday, pointing to an apparent pullback by consumers and a slowdown in the rehiring of furloughed workers, particularly by small businesses.
Accenture was chosen as the technology delivery partner following a procurement process begun in February 2019 and will work with the central bank on a renewed system that is slated to start to be delivered in 2022.
No one will be surprised if Federal Reserve chair Jerome Powell uses part of his news conference on Wednesday to scoff at the idea of the U.S. dollar losing its place as the world reserve currency.
The Ontario government appointed a task force with the purpose of updating securities laws and, two weeks ago, it proposed introducing a Canadian equivalent of 13F disclosure.
It is sometimes said that governments wasted the global financial crisis of 2007-09 by failing to rethink economic policy after the dust settled. Nobody will say the same about the covid-19 pandemic. It has led to a desperate scramble to enact policies that only a few months ago were either unimaginable or heretical. A profound shift is now taking place in economics as a result, of the sort that happens only once in a generation. Much as in the 1970s when clubby Keynesianism gave way to Milton Friedman’s austere monetarism, and in the 1990s when central banks were given their independence, so the pandemic marks the start of a new era. Its overriding preoccupation will be exploiting the opportunities and containing the enormous risks that stem from a supersized level of state intervention in the economy and financial markets.
When the Bank of Canada launched a program in mid-April to begin buying corporate bonds, it was embarking on a journey into unknown territory for a Canadian central bank. It’s turned out to be little more than a day trip.
The deal includes a $2.5 billion cash payout by Goldman and a guarantee by the bank to return at least $1.4 billion in assets linked to 1MDB bonds, Malaysia's finance ministry said in a statement.
When the European Union first suggested a tax on financial transactions a decade ago, the idea was savaged by banking lobbyists and nixed by many of the bloc’s members. The U.K. said it was “madness.” The initial ambition to raise up to 35 billion euros ($40.6 billion) a year was reduced to a mere 3.5 billion euros, with only 10 countries agreeing to take part. As of last year, the project was barely alive.
In May, Representative David Cicilline, chair of the judiciary committee’s antitrust panel, had demanded Jeff Bezos testify and threatened Amazon with a subpoena after reports surfaced that Amazon employees tapped data from small sellers in the company’s marketplace to make decisions about the online retailer launching its own competing products, despite telling lawmakers it did not engage in such practices.
OSFI has prepared the following questions and answers for federally regulated financial institutions about measures it has taken to address issues stemming from COVID-19.
How safe are the banks? It is a question that was asked during the financial crisis in 2008 and is again rearing its head as the economic cost of the coronavirus crisis becomes clearer.
Bill Morneau, facing questions from lawmakers studying the issue in Ottawa, apologized Wednesday for not repaying more than C$41,000 ($31,000) to the WE Charity until now.
The Bank of Canada has decided to cut its purchases of short-term government debt in half, saying that strains in both the federal and provincial markets “have diminished significantly” from when the bank ramped up its buying in the early days of the COVID-19 crisis.
The debt deluge comes after a flurry of interest-rate cuts and expanded asset-purchase plans by central banks left investment playbooks in shreds. With a net surplus of $980 billion in expected issuance beyond central-bank purchases, here’s a look at the supply and demand dynamics in the world’s major markets in the second half of the year.
Justin Trudeau parried hostile questions from lawmakers over a mishandled student grant program that’s tarnishing the Canadian prime minister’s reputation.
The chairman of the Senate banking committee sought to fend off criticism that Judy Shelton, Donald Trump’s pick for a seat on the Federal Reserve board, held extreme views and lacked independence, as her nomination advanced past a key hurdle in the Senate on Tuesday.
A spokesperson for Generation Squeeze said in an e-mail to Yahoo Finance Canada, “The 18-month project is currently in the design stage, with sessions expected to begin in September 2020. The specific solutions of focus will be determined by the stakeholders themselves once the process begins. More information about this project will become available once the sessions are underway. A final report outlining the Solutions Lab activities and participants will be published at the end of the project in early 2021.”
Under the scheme, which was detailed in a white paper this month, the government would provide a guarantee or backstop and would be “two layers away” from initial capital outlays, which would largely be taken care of by pooled insurance industry funds and private capital, said Neal.
A policy pause is underpinned by a string of better than expected economic data after a double-digit fall in gross domestic product in the three months to June, suggesting the 19-country eurozone’s economic contraction may not have been as bad as some feared.
Central banks generally like to maintain some mystery around their intentions so they don’t overly influence market behaviour. But in exceptional circumstances, they will deploy “forward guidance” based on the understanding that greater clarity should boost confidence. The path ahead remains highly uncertain, but at least executives and investors should now have a sense of how long they have to take advantage of exceptionally low interest rates.
On March 13, as signs of strain due to COVID-19 began to emerge, OSFI reduced the DSB from 2.25% to 1% of total riskâweighted assets. This decision provided banks with roughly $300 billon of additional lending capacity. On June 23, OSFI announced that the DSB would remain at 1%, unchanged from the level set on March 13, reflecting OSFI's assessment that the current DSB level remains effective in supporting the resilience of the Canadian banking system and the overall economy. OSFI will continue to monitor economic and financial conditions, vulnerabilities and signs of risks to the banking system, and the impact of COVID-19 policy responses. If conditions warrant, OSFI is prepared to release the DSB further.
During his years as Chairman of the Federal Reserve, Alan Greenspan became the icon of a communication style that later took the name of "Greenspeak": he made wordy and ambiguous statements. "Since I’ve become a central banker," he said on one occasion, "I have learned to mumble with great incoherence. If I seem unduly clear to you, you must have misunderstood what I said". Until the 1980s, communicating à la Greenspan was common for central bankers, based on the idea that the effectiveness of monetary policy required an element of surprise for the markets.
“We know what issuance is going to look like now and the Bank of Canada may react to that and adjust” their bond buying program, Royce Mendes, an economist at Canadian Imperial Bank of Commerce, said by phone.
If you own U.S. real estate, whether for personal use or for investment purposes, now may be a good time to ensure that you’re fully compliant with your Canadian tax filing obligations, as it appears that the Canada Revenue Agency may soon be doing some mass sleuthing of publicly-available U.S. property records.
What we’ve tried to achieve is supplementing the critical policing function of our capital markets regulator with a public policy imperative of growing the capital markets,” said Walied Soliman, task force chair and Canadian chair of law firm Norton Rose Fulbright in Toronto, in an interview.
The Bank of Canada is moving to help keep down long-term bond yields as Ottawa cranks up issuance to pay for COVID-19-related spending, analysts say, with the central bank raising the amount of 30-year bonds it buys in its quantitative easing program.
The Liberals originally saw the wage subsidy as a key tool to help cushion the economic blow from COVID-19 by helping workers stay tied to their employers while businesses remained closed due to the pandemic.
Canadian Underwriter - Kate McCaffrey (2020-07-10)
Calling COVID-19 “the challenge of our generation,” Finance Canada says the toll of COVID-19 on the broader economy in 2020 is expected to be the largest and most sudden economic contraction since the Great Depression. Private sector economists, they add, expect an annualized decline of over 40 per cent in Canada’s real GDP in the second quarter of this year. “The drop in real GDP is expected to be at its deepest in the second quarter of 2020,” they write. They also expect the economy to contract by 6.8 per cent in 2020, before rebounding 5.5 per cent in 2021.
The federal government is aiming to take full – and lasting – advantage of rock-bottom interest rates as it borrows record amounts to fund its COVID-19-driven spending.
Alberta Investment Management Corp., known as AIMCo, failed to properly gauge the potential for huge losses from a derivative trading strategy that involved betting against market volatility. In fact, AIMCo expanded the program two years ago and was too late to cut its losses before markets whipsawed in March, said the board’s report into the trading rout, released on Thursday.
Fitch’s downgrade foreshadowed the finance minister’s update, the government’s most comprehensive tally to date on the tremendous costs associated with fighting the COVID-19 pandemic.
Bloomberg - Theophilos Argitis, Esteban Duarte, and Kait Bolongaro (2020-07-09)
Justin Trudeau’s government made every effort on Wednesday to convince Canadians the country can afford a budget deficit that will soar to 16% of economic output this year. Its actions suggest there’s some worry.
Finance Minister Bill Morneau will forecast a deficit in excess of $300-billion Wednesday, sources say, as the government announces for the first time how shutting down large swaths of the economy and spending billions on emergency pandemic programs is affecting Ottawa’s bottom line.
While the massive shortfall has broad political support, it’s dramatic departure for a country with a longstanding aversion to debt and leaves Canada with the prospect of running large deficits for years to come. Morneau, the first finance minister to oversee a credit rating downgrade in 25 years, is under pressure to provide at least cursory assurances the government will return to a more fiscally prudent path once the coronavirus crisis has passed.
The federal government is aiming to take full – and lasting – advantage of rock-bottom interest rates as it borrows record amounts to fund its COVID-19-driven spending.
“Based on our economic forecasts out to 2024, deficits could be close to double those predicted by the government just six months ago, as weaker tax revenues take a significant toll,” it said. “We expect the revenue shortfall over the same period could total nearly $120 billion, largely this year and next.”
The Bank of Canada’s quarterly surveys show a sharp drop in both business and consumer confidence, as the COVID-19 pandemic casts a cloud of uncertainty and caution over both workers and their employers.
Reuters - Ebru Tuncay, Jonathan Spicer (2020-07-02)
Some Turkish banks are concerned that a “bad bank” plan to house billions of dollars of non-performing loans could require them to book large losses, and they want foreign stakeholders involved, seven industry sources told Reuters.
Minutes from the U.S. central bank’s June 9-10 meeting indicate policymakers held a lengthy debate about the critical next steps they may take in setting monetary policy for what they hope will be a continued recovery from a pandemic-driven health and economic crisis.
The rating agency said that it expects Alberta to record a deficit of around $20 billion in fiscal 2021, up from the $6.8 billion deficit originally anticipated in the provincial budget
The CFRF, which was jointly established by the U.K.’s Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) in 2019, aims to develop best practices among regulators and the industry for dealing with the financial risks from climate change.
The U.S. Federal Reserve’s massive stash of bonds and other assets slipped for a third straight week to its smallest size since mid-May, data released by the central bank on Thursday showed.
G&M - ARNO SCHUETZE AND ALEXANDER HÃBNER (2020-07-02)
Police and public prosecutors raided Wirecard’s headquarters in Munich and four properties in Germany and Austria on Wednesday as they widened their investigation into the financial payments company that collapsed last week.
Tax authorities in nearly 100 countries saw 10 trillion euros ($11.2 trillion) in offshore assets come to light last year due to the automatic exchange of details for 84 million bank accounts, the OECD said on Tuesday.
Alberta Premier Jason Kenney says he’s recently been reading about former U.S. President Franklin Roosevelt’s stimulus-spending response to the Great Depression of the 1930s.
If the long-awaited debut of Canada’s new trade pact with the United States and Mexico heralds a new dawn in North American relations, U.S. Trade Representative Robert Lighthizer sure has a funny way of showing it.
Bloomberg - Jennifer A Dlouhy and Todd Shields (2020-06-29)
The U.S. and China are moving beyond bellicose trade threats to exchanging regulatory punches that threaten a wide range of industries including technology, energy and air travel.
With the Fed considering a new monetary policy tool to help hold interest rates low amid the downturn, clues to the tactic’s effectiveness can be found far away: in Australia.
Brussels will call for a probe into whether BaFin, Germany’s banking regulator, failed in its supervision of Wirecard, warning that the payment company’s collapse poses a threat to investor trust in the EU.
The Canadian government is considering a shift to longer-term borrowing to finance a ballooning budget deficit, a strategy that would help it reduce potential pitfalls associated with short-term debt but which could also disrupt the balance in the country’s bond markets.
The government has recently acquired preferred shares in private companies, Fitzgibbon said, declining to name them. “We’d be minority for sure and hopefully at one point we can be replaced by other equity holders,” he said.
Its trio of announcements includes the annual stress tests showing how the top 34 banks would fare in a hypothetical crash, and another exercise examining whether the top 18 should be allowed to execute their dividend plans.
Austria has sold another “century bond” three years after its first, seizing on the ultra-low borrowing costs available in the market after unprecedented stimulus efforts from the European Central Bank.
G&M - JEANNA SMIALEK, PETER EAVIS AND KATE KELLY (2020-06-25)
The Federal Reserve on Thursday temporarily restricted shareholder payouts by the country’s biggest banks, barring them from buying back their own shares or increasing dividend payments in the third quarter as regulators try to ensure banks remain strong enough to keep lending through the pandemic-induced downturn.
The DSB was lowered by 1.25% on March 13, providing banks in excess of $300 billion of additional lending capacity. This action was taken to support banks' ability to continue to provide loans and services to Canadians. OSFI expects banks to continue to draw on this capacity to support Canadian businesses and households.
“This decision reflects OSFI’s assessment that the current DSB level remains effective in supporting the resilience of the Canadian banking system and the overall economy,” the regulator said in a press release.
Bloomberg - Suttinee Yuvejwattana and Chester Yung (2020-06-24)
With interest rates close to zero, the central bank is slowly running out of conventional policy space to support the economy. Officials have said they are studying unconventional steps, such as asset purchases and some form of yield curve control.
Securities regulators concluded 75 enforcement matters in the past year, leading to almost $60 million in sanctions, according to the Canadian Securities Administrators’ (CSA) latest enforcement report.
The Bank of Canada expects consumer demand to recover more slowly than output as the economy claws its way back from the COVID-19 crisis, a combination that could put “a lot of downward pressure” on inflation, Governor Tiff Macklem said Monday.
Canada's top central banker says there will be long-term economic damage from the COVID-19 pandemic as the country charts a "prolonged and bumpy" course to recovery.
FP - Bank of Canada's Macklem defends inflation targeting, despite lockdown-induced price distortions (2020-06-23)
“The message I want to leave you with is that while we are using different tools in these extraordinary times, our policy remains grounded in the same framework,” Macklem said. “The inflation target is our beacon that is guiding our actions as we help bring the economy from crisis, through reopening, to recuperation and recovery.”
Investors, looking past the COVID-19 pandemic, are betting that the Bank of Canada could be among the first major central banks to hike interest rates, signaling new governor Tiff Macklem’s success so far convincing the market not to expect negative rates.
The Federal Reserve will use an analysis of large banks’ ability to withstand various coronavirus-related recession scenarios as it forms policies on capital requirements, dividends and stock buybacks, a top central bank official said.
Nevertheless, Lagarde and her colleagues would be wise to read the staff paper closely. Among all the carefully worded language, one can clearly see the contours of a monetary framework that would work for the ECB’s third decade. These include changing the inflation target to 2%, and maintaining all of the instruments — asset purchases, long-term loans to the banking system and negative interest rates — that the central bank used throughout the presidency of Lagarde’s predecessor, Mario Draghi.
The argument for a symmetric inflation target is rooted in the power of expectations. The ECB at the moment aims to reach an inflation rate “close to but below 2%.” This means that, as price pressures start climbing toward 2%, investors and consumers expect the ECB to react aggressively, tightening monetary policy to push inflation back. The authors believe this served the ECB well during its first decade, when it had to establish its reputation and fight off inflationary forces.However, the objective has been less useful in today’s era of persistently low inflation. It may even be counterproductive. Consumers and investors don’t expect the central bank to act so decisively to counter deflation.
The Bank of Canada expects a two-phase recovery for the Canadian economy, with the initial “reopening” phase from COVID shutdowns to be followed by a slower, bumpier and more unpredictable “recuperation” phase, deputy governor Lawrence Schembri said Thursday.
WSJ - Jason Douglas in London and Tom Fairless (2020-06-18)
The Bank of England launched another burst of stimulus and the European Central Bank said lenders across the region had tapped its loan program for a record $1.5 trillion, signs that central banks’ efforts to fuel a recovery aren’t yet done.
It didn’t take long in Tiff Macklem’s first public appearance as Governor of the Bank of Canada to give us a small window into the character of the central bank’s new leader. Seven seconds, to be exact.
Prime Minister Justin Trudeau promised to release a “snapshot” of federal finances on July 8, but said his government “will continue to reflect” on when it will release a full fiscal update or a 2020 budget.
NDP Leader Jagmeet Singh has been expelled from the House of Commons for calling a Bloc Québécois MP racist and for refusing to apologize and withdraw his comments.
It's a heavy blow for Prime Minister Justin Trudeau, Foreign Affairs Minister François-Philippe Champagne and other high-level officials who had been reaching out to political leaders around the world in a campaign to secure one of the two available rotating seats.
But the central bank is now becoming a hedge fund. Adding low-quality corporate credits to its balance sheet is a whole different game: keeping zombie companies alive, rendering fundamental analysis and price discovery obsolete, and leading to a complete misallocation of resources.
U.S. stocks ditched losses to rally into the close after the Federal Reserve announced it would start buying individual corporate bonds in another attempt to protect the U.S. economy. Conway G. Gittens reports..
The bank, which takes over as benchmark administrator from Refinitiv Benchmark Services (UK) Ltd., said that it’s committed to ensuring that CORRA is “a robust, reliable and representative measure” of overnight funding rates.
After unleashing a barrage of measures early in the COVID-19 crisis to successfully stabilize financial markets and keep credit flowing, the Bank of Canada is about to pivot to bolstering the burgeoning economic recovery, new governor Tiff Macklem said Tuesday.
The Prime Minister rejected the idea of a fiscal update last week, arguing that “in this situation any prediction we make will be widely unreliable from one week to the next.”
The new Bank of Canada governor has been on the job for barely two weeks, so there’s lots of time to build a legacy. But early signs suggest Tiff Macklem intends to pick up where his predecessor left off, rather than change course or revert to the way things were done a decade ago.
Britain’s financial regulator has warned UK banks that they will need an entirely new way of dealing with personal and business debt, as the coronavirus pandemic pushes ever more borrowers into arrears or default.
Heightened uncertainty can cause liquidity in markets to dry up because the people who trade start behaving differently than they would in normal times. Buying and selling either slows quite a bit or it tilts firmly in one direction.
OSFI has prepared the following questions and answers for federally regulated financial institutions about measures it has taken to address issues stemming from COVID-19.
If the U.S. chooses to, it could seriously damage China in the financial realm—and China has little capacity to retaliate. Using such powerful tools carries risks, however.
European sovereign debt issuers are in the land of milk and honey, racing to get as much as possible of this year’s issuance completed before the summer lull. With so much monetary stimulus sloshing about, governments even have an eye on getting ahead of next year’s budget plans as well.
Governments around the world have spent $10 trillion in fiscal actions to respond to the novel coronavirus pandemic and its economic fallout, but significant further efforts are needed, the head of the International Monetary Fund said on Thursday.
A merger of the two regulatory organizations that oversee Canada’s investment industry could save hundreds of millions of dollars in regulatory fees over the next decade, according to a new report from Canada’s brokerage industry regulator.
An employment report showing 2.5 million jobs were created in May surprised economists with the speed at which firms started rehiring workers laid off en masse as virus-containment efforts forced businesses to close and consumers to stay home.
“People are very anxious to see what the policy projections look like,” said Stephen Stanley, chief economist at Amherst Pierpont Securities, though Powell may emphasize uncertainty. “He is likely to stress this isn’t any kind of ironclad commitment. We’re very foggy on how things are going to play out.”
The Federal Reserve has stepped in to save the economy again, this time from the coronavirus pandemic. Not only did it cut interest rates to almost zero, but it unleashed a barrage of new programs to prop up financial markets, and bail out investors and businesses that borrowed too much before the U.S. economy shut down to contain the outbreak. There is precedent for this: On a smaller scale, the Fed came to the rescue in the midst of the 2008 financial crisis. Few know more about central bank bailouts than Ben Bernanke, who led the Fed during that time. Bloomberg Opinion columnist Noah Smith interviewed him online last week. Below is a lightly edited transcript of their conversation.
Japanese regulators have warned the nation’s banks for the first time about the risk of investing in overseas securitized corporate loans, which have run into trouble from a wave of U.S. bankruptcies.
Following a week of widespread protests across the U.S., the rating agency said that the explosion of social tensions revealed long-standing social risks for governments, particularly states and governments of major cities.
In light of the recent developments, the Financial Information Committee (FIC) have made the following changes to the 2020 regulatory return implementation deadlines.
Bloomberg - Molly Smith and Craig Torres (2020-06-08)
The Federal Reserve may have stoked one of the strongest corporate debt market rallies in decades, but it’s too soon to declare an all-clear for credit with the economy facing a potentially rocky road ahead.
Brazil’s central bank chief says that newly granted quantitative easing powers are intended more for “market stabilisation and not an alternative form of monetary policy”.
The rating agency reported that, so far, governments have provided direct fiscal stimulus of US$5 trillion, which represents about 7% of GDP, in the 20 major economies (both developed and emerging markets) covered by its economics review
The Fed notes the discussions around this change “have considered cross-border interoperability issues that may occur if the Federal Reserve Banks and other high-value payment system operators have not implemented the ISO 20022 messaging standard by the time SWIFT enables its participants to start sending data-rich ISO-20022 messages over its global network.”
Under a $150,000 threshold, some 26% of all PPP loan dollars would qualify for automatic forgiveness, according to the banking trade groups. But 85% of PPP loan recipients would benefit.
Canada's central bank has dropped its rate dramatically since the pandemic began, cutting its rate from 1.75 per cent in late February to 0.25 per cent barely a month later.
“As market function improves and containment restrictions ease, the bank’s focus will shift to supporting the resumption of growth in output and employment,” the statement said. “The bank maintains its commitment to continue large-scale asset purchases until the economic recovery is well underway. Any further policy actions would be calibrated to provide the necessary degree of monetary policy accommodation required to achieve the inflation target.”
The Bank of Canada said the country’s economy appears to have avoided the worst case scenario, prompting policy makers to wind down some market operations and pare back estimates of the downturn.
“I don’t expect any policy changes,” Derek Holt, an economist at Bank of Nova Scotia, said by phone from Toronto. “They’ll leave that to Macklem not only because of the transitional issue but they haven’t firmed up” a full set of forecasts, which won’t come until the bank’s next monetary policy report in July.
Stephen Poloz concluded the public portion of his tenure as Bank of Canada governor on May 28 with a visit to the Senate finance committee, where he told senators he was confident the central bank’s response to the COVID-19 crisis was working, but that policy-makers could do more if required.
But just as when Poloz replaced media darling Mark Carney, who set off to an even more glamorous and demanding job at the Bank of England only to be replaced by a relatively stodgy and unknown replacement, changes of leadership style at the top matter.
“April SAMA data offers the first indication of the magnitude of the curfew with consumer spending tumbling 35% y/y despite 2x surge in food spending on Ramadan season and household stocking,” Arqaam Capital said in a research note.
Athabasca’s banking syndicate reduced its credit facility to $42 million after a review, which represents a 65 per cent cut from $120 million previously, the company said.
Due to the pandemic’s effects on the economy, some federally regulated pension plan sponsors are facing significant financial constraints. To provide temporary relief to sponsors of federally regulated, defined benefit pension plans, on April 15, 2020 the government announced a moratorium on solvency special payments.
Sample faq question: What does OSFI mean when it says banks can treat mortgage borrowers who apply for payment relief as performing loans? When does a bank now have to designate a mortgage loan as non-performing?
One of those details is a built-in safeguard for taxpayers which requires participating companies to give the government either an ownership stake or cash equivalent of 15 per cent of the principal loan amount.
The Commission president outlined a 750 billion-euro ($825 billion) rescue program to help the bloc cope with the fallout from Covid-19. EU governments still have to agree to the plan, and some northern member states — especially the Netherlands and Austria — are likely opponents. But if the final deal looks even close to Von der Leyen’s proposal, it will mark a radical transformation of Europe.
Speaking to the Senate finance committee Tuesday, Giroux said the government has added about $7.6 billion in spending since his last report, pushing the potential deficit ever deeper.
Although Mr. Trudeau has called the bank CEOs on occasion in the past, such direct discussions are not common. In the fall of 2018, Mr. Trudeau briefed them in separate calls at a key juncture in negotiations to redraw the North American free-trade agreement.
Parliament’s spending watchdog says the estimated federal deficit for the year has likely risen to about $260-billion with new measures rolled out in recent weeks.
One point he likes to make is that policy-makers learn from their mistakes, so errors of the past won’t be repeated. He went so far as to tell the House finance committee last month that he would welcome inflation because upward price pressure would imply the economy was recovering from the COVID-19 recession.
Governments lunged into the nationalization game in the autumn of 2008, when the financial crisis shredded banks alive. The novel coronavirus crisis will force them to make a repeat performance.
The Bank of England will begin to phase out weekly emergency support for financial markets that it introduced in response to coronavirus fears in March, now that markets have calmed and banks no longer have difficulty accessing cash.
One of OSFI's most important tools in the current situation is setting capital levels. You may wish to think of capital as a form of self-insurance, which provides both a buffer against unforeseen losses and an incentive to manage risk taking. Strong capital levels allow a financial institution to operate normally even if it experiences losses.
Bank of Canada Governor Stephen Poloz believes Canada’s economy remains on track for a healthy recovery this year from the COVID-19 crisis, despite the steady flow of discouraging economic headlines in recent weeks.
The governor has been forced to take unprecedented action just to keep credit markets from seizing up -- cutting the benchmark rate to near zero, injecting more than C$300 billion ($210 billion) of cash into financial markets and undertaking the central bank’s first-ever foray into large-scale purchases of government debt.
Total economic support during the pandemic equals about 10.2% of Canada’s GDP versus 12.7% south of the border, RBC said in a note published Wednesday. Canada’s measures lean more heavily toward repayable loans and short-term tax deferrals instead of direct spending and grants.
The federal government will be able to take an ownership stake in public companies and will block executives from earning more than $1-million, according to newly released details of Ottawa’s loan program for struggling large companies.
“The shutdown is not typical,” Timothy Lane, the longest-serving deputy governor on the Bank of Canada’s policy committee, said in a speech on May 20. “These shifts mean the standard consumer price index, based on the cost of a fixed basket of goods, is less meaningful.”
Joseph Otting is expected to step down this week as comptroller of the currency after completing an overhaul of rules governing billions of dollars of lending in low-income neighborhoods.
CEBA offers interest-free, partially forgivable loans of up to $40,000 for qualifying businesses. Previously, the program was available only to businesses with payrolls between $20,000 and $1.5 million.
The Federal Reserve is preparing to lend directly to middle-market businesses, filling a hole left by the government’s economic-crisis relief efforts, and it is shaping up to be one of the trickiest things it has ever done.
Wilkins, the central bank’s second-in-command, was the most qualified woman ever to compete for the position. The government’s decision to name Tiff Macklem was a disappointment to those who say it underscores slow progress in advancing women to executive roles in economics and finance. Canada may have a reputation as a progressive country, but no woman has ever been finance minister, central bank governor, chief executive of one of its six biggest banks, or head of a large public pension fund.
On Monday, Finance Minister Bill Morneau announced the Large Employer Emergency Financing Facility (LEEFF), through which Ottawa will give credit of $60 million or more to firms with at least $300 million in annual revenue that “make meaningful investments in Canada, and provide jobs to Canadians.”
In recent years, the CRA has made it a greater priority to target the “hidden economy” by dedicating more resources toward combatting non-compliance. According to an Ontario Ministry of Labour study cited in the decision, 28% of the construction industry’s economic activity was unreported or underreported, and as much as one-fifth of residential construction takes place unreported.
Growing talk of negative interest rates in Canada and the United States is stirring fear about what such a dramatic move by central banks might mean for savers and investors.
Bloomberg - Shelly Hagan and Kait Bolongaro (2020-05-13)
The Canadian government is in talks to hire Lazard as the financial adviser for its new loan program for large companies, according to a person familiar with the matter.
Bloomberg - Charles Daly and Christian Wienberg (2020-05-12)
The government of Prime Minister Stefan Lofven plans to spend about 2.2 billion kronor ($220 million) on ratcheting up staff levels to help protect the country’s oldest citizens. Another 2 billion kronor will go toward compensating local authorities for the extra costs they’ve incurred in dealing with the pandemic, the government said on Tuesday.
Despite the awesome powers invested in the person who leads the country’s central bank, most Canadians do not know what that person does and most probably do not care. Their blissful ignorance spares the head of the Bank of Canada from much scrutiny.
A few weeks ago The Globe and Mail cited a source who said Poloz was not offered an opportunity to stay beyond his June retirement to allow for some leadership continuity as the bank tackled the COVID-19 crisis. Instead, the Morneau/Trudeau team moved swiftly to appoint Tiff Macklem, a former Bank of Canada deputy governor who will return to the bank after serving for six years as dean of the Rotman School of Management at the University of Toronto.
Federal Reserve officials are unlikely to consider using negative interest rates to stimulate economic growth after concluding the tool’s clear costs outweigh its uncertain benefits.
between 2004 and 2012 bnp Paribas helped funnel $30bn into Sudan, Cuba and Iran, all then under American sanctions. It hid its tracks using a network of “satellite” banks and by stripping payment messages of incriminating references. Whistleblowers tipped off American prosecutors. The bank pleaded guilty, expecting to pay €1.1bn ($1.2bn). It was fined $8.9bn by American authorities in 2014, and the case escalated to a diplomatic row.
The Bank opened and staffed a new operational site in Calgary, which is designed to take over all essential operations in case of a major disruption in Ottawa. Already, critical operations are being routinely managed jointly or being rotated between the two locations. We launched and began to implement a new cyber security strategy, integrating the Bank’s critical role within the Canadian financial system.
One of the hedge fund industry’s longest-standing bears has ditched his holdings in government bonds, saying the central bankers who have helped propel their stratospheric rise over recent years are “fruit loops”.
“Whether it’s a risk of inflation or deflation, central bank credibility is critical. This requires keeping our eye on the ball in terms of our mandate, and retaining the operational independence to achieve it,” she said.
The European Central Bank rolled out its cheapest ever loans for eurozone banks and said it would consider expanding a €750 billion bond-buying program, amplifying its firepower to contain the economic fallout from the coronavirus pandemic.
WSJ - Kate Davidson and Richard Rubin (2020-05-05)
Treasury Secretary Steven Mnuchin said he expects the government will recover much of the funds it has committed to backstop the Federal Reserve’s emergency lending programs, suggesting he doesn’t anticipate widespread losses on the loans.
Still, even with the government being able to borrow so cheaply, it’s possible the feds may introduce post-pandemic austerity measures. But Mendes noted that 2011 research from Olivier Blanchard, then the chief economist with the International Monetary Fund, found that “austerity could actually be self-defeating when attempting to lower debt-to-GDP ratios.”
If anyone can empathize with the disappointment that Carolyn Wilkins must be feeling about being passed over for the top job at the Bank of Canada, it’s Tiff Macklem, the man who just beat her to it.
The Federal Reserve has scrapped plans to use a $600 billion aid program for small and midsize businesses to promote the use of its preferred replacement for the troubled London interbank offered rate.
Since the global financial crisis, OSFI has raised capital requirements for DTIs and further required DTIs to exceed those requirements under normal conditions by building robust capital buffers.
The world’s central banks have responded to the pandemic with massive programs to support financial markets. But are their policies just setting us up for more trouble down the road?
Bank of Canada Governor Stephen Poloz said “life has been a blur” over the past two months, as he has steered the country’s central bank through perhaps the most difficult, hectic and complicated period in its history in response to COVID-19.
Bank of Canada Governor Stephen Poloz dismissed the possibility his emergency measures could trigger an inflationary spike, providing assurances the central bank’s balance sheet expansion will reverse once the economy improves and financial markets return to normal.
Policy makers were compelled to respond aggressively to the crisis in order to avoid a credit crunch and counter a deflationary shock in the economy, Poloz said, according to the text of remarks he gave by video conference to students at Western University’s Ivey Business School. That makes the injection of cash into the economy, which would be inflationary in normal circumstances, simply a stabilizing force.
“Crisis conditions argue for vigorous, even outsized, responses because maintaining confidence is critical to the recovery,” said Poloz, who’s due to step down in June after serving a seven-year term. “Gradualism is unlikely to succeed.”
OSFI has prepared the following questions and answers for federally regulated financial institutions about measures it has taken to address issues stemming from COVID-19.
The corporate bond market reacted with nothing short of euphoria each time the Fed unveiled how it would go about backstopping debt from U.S. companies. The largest exchange-traded fund tracking the investment-grade market, known by its ticker LQD, surged 7.4% on March 23, the biggest gain in more than a decade. That was the day the Fed announced the terms in which it would wade into credit markets to an unprecedented degree. LQD popped an additiona 4.7% on April 9, when the central bank expanded its program to include “fallen angels” and even junk-bond ETFs. The largest high-yield bond ETF (ticker: HYG) benefited the most, jumping by 6.6%, the most since January 2009.
But national finance isn’t household finance. A person’s lifespan is constrained, as is their capacity for income growth; a country is a very different creature.
Georgia, at the vanguard of states testing the safety of reopening the U.S. economy in the midst of the coronavirus outbreak, permitted restaurant dining for the first time in a month on Monday while governors in regions with fewer cases also eased restrictions.
Prime Minister Justin Trudeau’s search for a successor to Bank of Canada Governor Stephen Poloz is entering its final days with the government having already reduced the shortlist of candidates to two, according to people familiar with the matter.
Fed leaders have suggested they are comfortable with their current policy stance, but big questions will dominate deliberations at their two-day policy meeting next week, including how to manage bond-buying efforts and how long to extend those easy-money policies.
Unprecedented situations require unprecedented actions. That’s why the U.S. Federal Reserve should fight a rapidly deepening recession by taking interest rates below zero for the first time ever.
This suggested the ECB would continue hoovering up bonds only on the secondary market even if it comes close to owning a third of the debt of countries such as Germany and Portugal.
The exact design of the wide array of emergency facilities the Bank has set up in recent weeks is open to debate. The sheer size of these facilities is not. It is a fact — and unprecedented. In less than a month (March 11 to April 8), the Bank’s balance sheet more than doubled — from $120 billion to $275 billion. By contrast, its largest one-month increase in 2008 was a mere 20 per cent. Even the Fed didn’t move that fast or that much, either in 2008 or during this pandemic, for that matter.
Bloomberg - Michelle Jamrisko and Gregor Stuart Hunter (2020-04-23)
As governments dedicate more than $8 trillion to fight the coronavirus pandemic, a further widening in the gap between rich and poor countries threatens to exacerbate the global economy’s pain.
OSFI has prepared the following questions and answers for federally regulated financial institutions about measures it has taken to address issues stemming from COVID-19.
A new federal program to backstop loans to small and mid-sized energy companies could cut the number of producers that fall into bankruptcy in the coming months as oil prices hit record lows, according to executives and analysts.
The IMF predicts that Canada will be the second biggest budget-buster of all advanced countries. Our general government fiscal deficit is expected to be 11.8 per cent of GDP, surpassed only by the United States. Only oil-rich Norway is expected to run a fiscal surplus in 2020, though that will be down from its healthy surpluses of earlier years.
“Canada has earned a reputation for strong adherence to international banking standards,” OSFI said in a statement released April 17. “At the same time, Canada has also earned a reputation for ‘going its own way’ on bank capital while respecting the international minimum standards.”
In the eyes of skeptics, these aggressive monetary manoeuvres risk an outburst of inflation down the road. Others, however, see the wave of money printing as simply an acknowledgment that drastic action is necessary to contain the stresses created by an imploding global economy.
It took 12 minutes for Silvano Tocchi to know for certain that the Canada Revenue Agency had succeeded in its three-week scramble to get emergency benefits into the hands of millions of desperate Canadians.
The Senate on Tuesday passed a $484 billion coronavirus relief package that would replenish a depleted loan program for distressed small businesses and provide funds for hospitals and coronavirus testing, approving yet another huge infusion of federal money to address the public health and economic crisis brought on by the pandemic.
As Congress stands at an impasse over how to replenish funds for a now-depleted small business loan program, Sens. Steve Daines and Cory Booker are pushing for the next round of coronavirus aid to allocate money that would enable local communities to assist very small firms.
The Bank of Canada expanded its new bond-buying program Wednesday to include purchases on the open market of long-term provincial and corporate debt, stepping in to aid provinces and big businesses in tapping strained credit markets for sorely needed funds.
OSFI has prepared the following questions and answers for federally regulated financial institutions about measures it has taken to address issues stemming from COVID-19.
Momani says the world's poorest people, not just in South Asia, sub-Saharan Africa and South America but in U.S. inner cities, too, will suffer the most, and in ways that could lead to revolts. Places such as Venezuela, already chaotic, may collapse into something worse.
The central bank has already cut interest rates to near zero and injected C$150 billion ($108 billion) into financial markets with a program of asset purchases. Additional measures could include following the Reserve Bank of Australia’s recent move into yield curve control, introducing more explicit forward guidance on future policy intentions, or broadening asset purchases to include long-term provincial securities and corporate debt.
After seven years at the helm, Bank of Canada Governor Stephen Poloz would probably have preferred to go out with a whisper rather than a bang. Fate decided against that.
The Canadian government will make it easier for companies to qualify for a wage subsidy program aimed at companies hit by the coronavirus after business groups said the rules were too restrictive.
WSJ - Kate Davidson and Nick Timiraos (2020-04-07)
The Fed said it would create a new program to finance loans that banks and other lenders make through the government’s emergency small-business lending program.
Canada’s banks spent the weekend in intensive talks with Ottawa to iron out details of a program that will give interest-free loans to small businesses suffering due to the new coronavirus, but the length of time needed to process those loans has become a key point of discussion.
David Dodge has some candid things to say about the powerful weapons that the current leadership at the Bank of Canada has unleashed to fight the COVID-19 crisis.
Faced with complaints from small banks, the federal government doubled the interest rate it will pay lenders—to 1%, up from 0.5%—under its emergency loan program for small businesses.
Bloomberg - John Ainger and James Hirai (2020-04-03)
Britain’s Debt Management Office will have to raise sales of government bonds to 285 billion pounds ($352 billion), according to Citigroup Inc. That’s over 50 billion pounds more than during the great financial crisis.
Canada’s central bank has a capable markets desk, but there’s only so much a relatively small group of 100 men and women can do at one time, especially when they have been forced to spread out in multiple locations to lower the odds that COVID-19 will infect their ranks.
The Bank of Canada is likely to buy about $200-billion of government debt after announcing its first quantitative-easing program, which would nearly triple the amount of assets on the central bank’s balance sheet, bond strategists estimate.
The U.S. Federal Reserve on Tuesday broadened the ability of dozens of foreign central banks to access U.S. dollars during the coronavirus crisis by allowing them to exchange their holdings of U.S. Treasury securities for overnight dollar loans.
Allowing foreign central banks to access the Federal Reserve’s repo facilities is effectively cost-free, benefits American lenders and borrowers, and cements the dollar’s already-dominant role at the top of the hierarchy of currencies.
The central bank launched its latest lending program to alleviate market strains by allowing foreign central banks to convert their holdings of Treasurys into dollars.
From 2014: Considering Bernanke is hated by the Republicans and hated even more by the Democrats, and is currently under scrutiny for saving AIG but not Lehman, (in hindsight) with respect to issues over solvency vs liquidity, the Montreal lovefest attended by 1,100 people yesterday must have been a welcome respite. Click the link to read the entire 2014 report.
Canada's banks are preparing to start offering government-backed loans to small businesses as soon as next week amid a flood of requests for relief from business owners.
Foreign Affairs Minister Francois-Philippe Champagne and International Development Minister Karina Gould confirmed the continuing campaigning in separate interviews with the Canadian Press this past week.
Canada’s banking regulator is giving financial institutions more flexibility on requirements such as capital buffers and filing deadlines to help banks, pension funds and insurers cope with the fallout of COVID-19.
The People’s Bank of China (PBOC) announced on its website that it was lowering the 7-day reverse repo rate CN7DRRP=PBOC to 2.20% from 2.40%, but it did not give a reason for the move.
The Federal Reserve quickly deployed a half-dozen emergency lending programs over the past two weeks. Now, Congress wants it to go much further, approving $454 billion to reload the Fed’s own ability to lend.
Reuters - Richard Cowan, David Morgan, Patricia Zengerle (2020-03-26)
The U.S. Senate on Wednesday unanimously backed a $2 trillion bill aimed at helping unemployed workers and industries hurt by the coronavirus epidemic, as well as providing billions of dollars to buy urgently needed medical equipment.
The Bank of England is expected to say on Thursday that it is ready to take further radical action to prop up the economy and Britain’s finance minister will announce help for self-employed workers hit by the coronavirus shutdown.
Short-time work is a form of state aid that allows employers to switch employees to shorter working hours during an economic downturn to keep them on the payroll. It has been widely used by industry, including Germany’s car sector, but not by banks.
Canada Mortgage and Housing Corp. is tripling the size of its program to buy insured mortgage pools to $150-billion, more than double the amount the Crown corporation bought during the 2008 financial crisis.
The Fed’s total balance sheet size exploded by more than half a trillion dollars in a single week, roughly twice the pace of the next-largest weekly expansion in the financial crisis in October 2008. As of Wednesday, the Fed’s stash of assets totaled $5.3 trillion, according to data released on Thursday.
The European Central Bank sent a powerful signal to investors that it will aggressively support Italy and other indebted eurozone countries that are battling the coronavirus, starting purchases under a new €750 billion ($812 billion) bond-buying program.
