Interest rates

Thursday September 8, 2022

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday September 8, 2022

Justin Trudeau’s hands-off approach to inflation is becoming untenable

May 10, 2022

Prime Minister Justin Trudeau faces growing pressure to help Canadian households offset surging inflation as he meets with his cabinet in Vancouver this week to set his government’s fall agenda.

Unlike many of his global peers, Trudeau has avoided taking new measures recently to ease the burden of rising prices, even with inflation at its highest level since the early 1980s.

That may reflect a growing political sensitivity to criticism his government overspent during the pandemic, leaving the country with less fiscal room to tackle big future challenges like climate change. But there is also a wariness that doling out money to ease price pain may only wind up stoking more inflation.

Staying on the sidelines, however, has become increasingly difficult.

April 1, 2022

Trudeau is riding low in opinion polls after nearly seven years in power. And the likely election next month of Pierre Poilievre as new leader of the Conservative Party will add more urgency to the inflation debate. Poilievre has focused relentlessly on the cost of living during his leadership campaign, using the label “Justinflation” as he pins the blame on Trudeau.

Canada’s economy is doing better than most, thanks to high prices for commodities, its abundance of energy and strong population growth. Worker shortages are widespread. That means the nation would probably struggle more than peers to absorb more government spending that adds to demand.

From a short-term fiscal perspective, the government can use revenue windfalls to pay for any new measures it wants to take. The most likely scenario is something along the margins, targeted to those who need it most and in line with the Trudeau government’s net-zero commitments — so no blanket rebates for drivers filling up their cars with gasoline.

So far this year, the government has been pulling in billions more than anticipated.

June 17, 2022

National income — the best indicator for revenue — is on track to come in nearly $100 billion (US$77 billion) higher in 2022 than Freeland forecast in her April budget. That could mean as much as $15 billion in additional revenue.

For the first three months of the current fiscal year — April through June — the federal government ran a surplus, a surprise start given the $53 billion deficit projected for the year. The preliminary deficit for the fiscal year that ended March 31 was below $100 billion, versus $114 billion forecast earlier this year.

But it would be wrong to project those trends forward. (Financial Post) 

From sketch to finish, see the current way Graeme completes an editorial cartoon using an iPencil, the Procreate app, and a couple of cheats on an iPad Pro …

 

Thursday March 1, 2018

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday March 1, 2018

Canada budget holds fire amid NAFTA clouds, focuses on women

Canada’s Liberal government tackled long-term growth challenges on Tuesday in a budget aimed at boosting women in the workforce and diversifying trade, while keeping its fiscal powder dry in case of an economic shock like the demise of NAFTA.

Finance Minister Bill Morneau’s third budget outlined slight deficit improvements without much in the way of new spending, refusing to blink in the face of U.S. corporate tax cuts and trade uncertainty that strike fear into Canadian companies. 

“We will be vigilant in making sure Canada remains the best place to invest, create jobs and do business – and we will do this in a responsible and careful way, letting evidence, and not emotion, guide our decisions,” Morneau said in a prepared budget speech. 

The budget blueprint, which is bound to be implemented given the Liberal’s parliamentary majority, maintained a C$3 billion ($2.4 billion) fiscal cushion each year to guard against any unexpected event that could hurt the government books. 

Even with the cushion, the projected deficit in 2018-2019 declined to C$18.1 billion from C$18.6 billion forecast in October, a restrained target unlikely to have any impact on financial markets or the Bank of Canada’s rate tightening path.

The loss of NAFTA would sideswipe Canada, which sends 75 percent of exports to the United States, and the decision not to slash corporate tax rates in response to the U.S. move puts Canadian companies at a disadvantage.

The unspoken bet is that Canadian exports will benefit from a roaring U.S. economy, even if business investment is lured away by the U.S. tax cuts. Canadian growth is already leading G7 rivals, spurring three rate hikes by the Bank of Canada since July, and the unemployment rate is near a 40-year low.

The budget did not address concerns that voters could come under pressure as rising rates increase the burden of record household debt, which the central bank has flagged as a risk.

Opposition Conservative leader Andrew Scheer blasted Prime Minister Justin Trudeau’s Liberals for maintaining budget deficits far into the future and adding to the national debt.(Source: Reuters) 

 

Thursday January 18, 2018

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday January 18, 2018

Bank of Canada raises key interest rate to 1.25% despite NAFTA worries

The Bank of Canada raised its key lending rate by a quarter percentage point to 1.25 per cent Wednesday, the third time it has moved its benchmark rate from once-record lows last summer.

The bank’s rate has an impact on rates that Canadians get from retail banks for things like mortgages, savings accounts and GICs. The move means borrowers can expect to pay more, but savers can expect to earn more, too.

After the central bank moved in the morning, the Royal Bank of Canada and Toronto-Dominion Bank each hiked their prime lending rates by the same amount, 25 points, in the afternoon. The new rates of 3.45 per cent will be in effect as of Thursday, Jan. 18. Canada’s other big banks are expected to follow suit.

The Bank of Canada was widely expected to raise its key rate after economic data in recent months showed gross domestic product growing, the job market healthy and the cost of living ticking higher.

The bank’s benchmark rate is now at its highest level since 2009.

In the MPR, the bank nudged up its expectations for how the economy will perform this year and next. The bank now expects Canada’s economy to expand by 2.2 per cent this year and 1.6 per cent in 2019. Previously the bank was anticipating 2.1 and 1.5 per cent growth. 

But while broadly positive about the economy’s prospects, the bank cited “uncertainty about the future of NAFTA” as a reason for concern moving forward. (Source: CBC) 

 

Wednesday July 12, 2017

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Wednesday July 12, 2017

Bank of Canada may hike interest rate for 1st time in 7 years

After almost a decade of warnings that never came to pass, it appears as though the Bank of Canada is ramping up to hike its benchmark interest rate — possibly as soon as next week.

July 16, 2015

On July 12, Canada’s central bank will announce its latest decision on where to place its trend-setting interest rate, which has an impact on the rates that Canadian borrowers and savers get for their bank accounts, mortgages and other products.

Eight times a year, the bank’s board of governors meets to assess the latest economic indicators and decide whether Canada’s economy needs a shot in the arm from a rate cut, or a pump of the brakes by way of a hike.

And for the first time in 54 such meetings, it’s looking like the latter is in order.

It’s not like there haven’t been warning signs. By the time Stephen Poloz was named to replace Mark Carney atop the bank in 2013, the central bank had already been on the sidelines for more than two years, its benchmark interest rate set at one per cent.

May 13, 2010

But even as the bank kept loans cheap coming out of the financial crisis, the messaging from the top came early and often that Canadians should be forewarned — rates have to go up eventually.

As far back as 2014 Poloz warned Canadians that rates would rise “soon” — before oil’s plunge in 2015 caused the bank to lose its nerve. Instead, the central bank moved in the opposite direction, cutting rates twice that year to bring its rate to 0.5 per cent, where it currently sits.

At the time, those hikes were described as a temporary measure to help a Canadian economy that had been waylaid by an oil price that lost more than 70 per cent of its value in a matter of months. But in recent weeks the bank has started leaving clear signals that despite oil still being in the $40-per-barrel range, those temporary conditions are over and it’s time for a return to normalcy. (Source: CBC News) 

 

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Thursday July 16, 2015

Thursday July 16, 2015Editorial cartoon by Graeme MacKay, The Hamilton Spectator – Thursday July 16, 2015

Bank of Canada cuts interest rate, lowers economic outlook

The Bank of Canada reduced its benchmark interest rate for a second time this year as the damage from lower oil prices shrank the economy in the first half and leaves a full recovery almost two years away.

Gross domestic product probably “contracted modestly” in the first half of 2015, policy makers said, without calling it a recession, which is typically defined as two straight quarters of negative growth. Output will recover this quarter as non-energy exports rebound from a decline the bank called “puzzling.”

The central bank lowered the benchmark rate on overnight loans between commercial banks to 0.5 per cent from 0.75 per cent, where it had been since a cut in January. The first-half contraction led to a “marked increase in excess capacity,” the bank
said.

Policy makers at the bank said output probably shrank at a 0.5 per cent annualized pace in the second quarter, compared with an April prediction of a 1.8 per cent expansion. The economy registered a 0.6 per cent contraction between January and March.

Historically low interest rates have already pushed consumer debt-loads and home prices to record highs, while failing to trigger lasting investment and export gains.

For the housing market, where the cheapest mortgages in decades have led to record consumer debt burdens, the bank reiterated its view there’s no bubble. “The Bank continues to anticipate a constructive evolution in the housing market,” its economic forecast paper said, with a moderation in housing in 2015, followed by stabilization in 2016 and 2017.  (Source: Hamilton Spectator)