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CTV News
4 days ago
- Business
- CTV News
‘Mission impossible': Why the Bank of Canada faces ‘risky' June rate decision
The Bank of Canada is set for an interest rate decision on Wednesday. Tiff Macklem, governor of the central bank, holds a press conference at the Bank of Canada in Ottawa on Wednesday, March 12, 2025. THE CANADIAN PRESS/Sean Kilpatrick OTTAWA — OTTAWA — Few would confuse Hollywood action star Tom Cruise with Bank of Canada governor Tiff Macklem. But while Cruise rides a plane in tailspin to his latest box office smash, some economists say Macklem finds himself in his own high-stakes circumstances with the central bank's interest rate decision on Wednesday. Macklem's mission is to chart a path for interest rates that keeps Canada's economy afloat at a precarious moment without straying from its inflation-taming mandate. 'It really is mission impossible,' said Andrew DiCapua, principal economist at the Canadian Chamber of Commerce. The latest data show price pressures could be building up again in Canada at the same time some economists warn of a tariff-induced slowdown on the horizon, pulling monetary policy in opposite directions. 'The bank really is in a difficult position here, but they really should be resuming rate cuts to get their interest rates lower to somewhere around two per cent, again, to cushion the Canadian economy for what's to come,' DiCapua argued. The Bank of Canada's policy rate stands at 2.75 per cent following a pause at the central bank's last decision in April, snapping a streak of seven consecutive cuts. Most economists expect the central bank will hold rates again on Wednesday. In April, Macklem said the Bank of Canada would pause issuing any formal forecasts and be less forward-looking than usual until it gained more certainty on how the economy would react to ever-shifting tariff threats. President Donald Trump threw a new wrench into the gears of global trade late Friday when he announced plans to double existing tariffs on steel and aluminum entering the United States to 50 per cent starting Wednesday. After Statistics Canada reported a surprisingly strong 2.2 per cent annualized rise in real gross domestic product for the first quarter on Friday, money markets were betting overwhelmingly in favour of another rate hold this week. BMO last week firmed up its call for another hold in response to the latest economic data, now projecting a cut to instead come in July. 'The key point here is that the GDP figures are sending no obvious distress signals so far in 2025,' BMO chief economist Doug Porter said in a note to clients. But the question for some economists isn't what the economy has done — it's what comes next. The Bank of Canada's own surveys of businesses published in early April showed sentiment was 'sharply' lower amid the tariff uncertainty, with many firms putting investment and hiring plans on hold. StatCan said the main reason Canada's economy was growing in the first quarter was because many businesses were trying to rush ahead of the tariffs, ramping up exports and stockpiling inventories. Macklem said at the G7 Finance Ministers' Summit in Kananaskis, Alta., last month that the Bank of Canada was expecting a run-up in economic activity in the first quarter, but that the months that follow 'will be quite a bit weaker.' 'They're really waiting for a shoe to drop, so to speak,' said DiCapua. There were early signs of economic pain in the April jobs figures released last month, with the trade-sensitive manufacturing sector contracting by roughly 31,000 positions and the unemployment rate rising two ticks to 6.9 per cent. A slowing economy usually takes the steam out of inflation as Canadians swap spending for saving, but April inflation data showed underlying price pressures were instead heating up. Cutting interest rates can encourage businesses and consumers to spend — mitigating an economic hit — but also risks fuelling inflationary pressures. 'Outside of the current situation that we're in, I would say that the Bank of Canada should be holding interest rates,' DiCapua said. 'But the data that we are seeing come in, especially through the labour market ... is going to move the Canadian economy into a very weak position that should keep prices at bay. So it's kind of a risky balance here.' Stephen Brown, deputy chief North America economist at Capital Economics, said he expects the central bank will deliver three more quarter-point cuts at every other decision to bring the policy rate down to two per cent before the end of the year. 'Our view at Capital Economics is that it's worth cutting again in June as insurance against those downside risks and try and protect the economy a bit,' he said. There are also 'psychological' reasons for a June cut, Brown argued. Should the Bank of Canada keep rates elevated, businesses and consumers may hold back even more on their spending decisions, which can become a self-fulfilling prophecy that weakens the economy. 'If the bank doesn't cut here, because they're still very concerned about inflation, that's telling businesses and consumers that the bank doesn't necessarily have their back,' Brown said. CIBC chief economist Avery Shenfeld is among those calling for a rate hold this week. He said he sees the case for an interest rate cut too, but doesn't think the Bank of Canada's June decision is its final reckoning. 'No one interest rate decision in isolation would ever be a fatal error one way or the other, but I think the clock will start to tick louder on getting some interest rate relief if the economy remains soft,' Shenfeld said. This report by The Canadian Press was first published June 2, 2025. Craig Lord, The Canadian Press
Yahoo
4 days ago
- Business
- Yahoo
'Mission impossible': Why the Bank of Canada faces 'risky' June rate decision
OTTAWA — Few would confuse Hollywood action star Tom Cruise with Bank of Canada governor Tiff Macklem. But while Cruise rides a plane in tailspin to his latest box office smash, some economists say Macklem finds himself in his own high-stakes circumstances with the central bank's interest rate decision on Wednesday. Macklem's mission is to chart a path for interest rates that keeps Canada's economy afloat at a precarious moment without straying from its inflation-taming mandate. "It really is mission impossible," said Andrew DiCapua, principal economist at the Canadian Chamber of Commerce. The latest data show price pressures could be building up again in Canada at the same time some economists warn of a tariff-induced slowdown on the horizon, pulling monetary policy in opposite directions. "The bank really is in a difficult position here, but they really should be resuming rate cuts to get their interest rates lower to somewhere around two per cent, again, to cushion the Canadian economy for what's to come," DiCapua argued. The Bank of Canada's policy rate stands at 2.75 per cent following a pause at the central bank's last decision in April, snapping a streak of seven consecutive cuts. Most economists expect the central bank will hold rates again on Wednesday. In April, Macklem said the Bank of Canada would pause issuing any formal forecasts and be less forward-looking than usual until it gained more certainty on how the economy would react to ever-shifting tariff threats. President Donald Trump threw a new wrench into the gears of global trade late Friday when he announced plans to double existing tariffs on steel and aluminum entering the United States to 50 per cent starting Wednesday. After Statistics Canada reported a surprisingly strong 2.2 per cent annualized rise in real gross domestic product for the first quarter on Friday, money markets were betting overwhelmingly in favour of another rate hold this week. BMO last week firmed up its call for another hold in response to the latest economic data, now projecting a cut to instead come in July. "The key point here is that the GDP figures are sending no obvious distress signals so far in 2025," BMO chief economist Doug Porter said in a note to clients. But the question for some economists isn't what the economy has done — it's what comes next. The Bank of Canada's own surveys of businesses published in early April showed sentiment was "sharply" lower amid the tariff uncertainty, with many firms putting investment and hiring plans on hold. StatCan said the main reason Canada's economy was growing in the first quarter was because many businesses were trying to rush ahead of the tariffs, ramping up exports and stockpiling inventories. Macklem said at the G7 Finance Ministers' Summit in Kananaskis, Alta., last month that the Bank of Canada was expecting a run-up in economic activity in the first quarter, but that the months that follow "will be quite a bit weaker." "They're really waiting for a shoe to drop, so to speak," said DiCapua. There were early signs of economic pain in the April jobs figures released last month, with the trade-sensitive manufacturing sector contracting by roughly 31,000 positions and the unemployment rate rising two ticks to 6.9 per cent. A slowing economy usually takes the steam out of inflation as Canadians swap spending for saving, but April inflation data showed underlying price pressures were instead heating up. Cutting interest rates can encourage businesses and consumers to spend — mitigating an economic hit — but also risks fuelling inflationary pressures. "Outside of the current situation that we're in, I would say that the Bank of Canada should be holding interest rates," DiCapua said. "But the data that we are seeing come in, especially through the labour market ... is going to move the Canadian economy into a very weak position that should keep prices at bay. So it's kind of a risky balance here." Stephen Brown, deputy chief North America economist at Capital Economics, said he expects the central bank will deliver three more quarter-point cuts at every other decision to bring the policy rate down to two per cent before the end of the year. "Our view at Capital Economics is that it's worth cutting again in June as insurance against those downside risks and try and protect the economy a bit," he said. There are also "psychological" reasons for a June cut, Brown argued. Should the Bank of Canada keep rates elevated, businesses and consumers may hold back even more on their spending decisions, which can become a self-fulfilling prophecy that weakens the economy. "If the bank doesn't cut here, because they're still very concerned about inflation, that's telling businesses and consumers that the bank doesn't necessarily have their back," Brown said. CIBC chief economist Avery Shenfeld is among those calling for a rate hold this week. He said he sees the case for an interest rate cut too, but doesn't think the Bank of Canada's June decision is its final reckoning. "No one interest rate decision in isolation would ever be a fatal error one way or the other, but I think the clock will start to tick louder on getting some interest rate relief if the economy remains soft," Shenfeld said. This report by The Canadian Press was first published June 2, 2025. Craig Lord, The Canadian Press Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CTV News
29-05-2025
- Business
- CTV News
Canada ‘not out of the woods' yet after court rules against some of Trump's tariffs
Prime Minister Mark Carney and U.S. President Donald Trump engage in a meeting at the White House in Washington, D.C., Tuesday, May 6, 2025. THE CANADIAN PRESS/Adrian Wyld While Ottawa is welcoming a U.S. federal court decision that would block President Donald Trump's fentanyl-related tariffs against Canada, experts say local businesses are 'not out of the woods' yet. On Wednesday, a decision by the U.S. Court of International Trade said Trump does not have the authority to wield tariffs on nearly every country through the use of the International Economic Emergency Powers Act of 1977 — a national security statute that gives the president authority to control economic transactions after declaring an emergency. The Trump administration filed a notice of appeal soon after the ruling came down from a three-judge panel. Toronto lawyer Sean Stephenson of Dentons, whose practice focuses on international trade and sanctions, cautions that 'nothing changes overnight' with this ruling, especially given the appeal process that awaits. Even if the ruling is eventually upheld, he says Trump could potentially try to use a number of alternative levers at his disposal to reimpose tariffs against Canada and other countries that were ruled unconstitutional under the emergency justification. Business groups in Canada also say they don't feel the ruling brings any new certainty in the immediate term, with the Canadian Chamber of Commerce adding that 'ultimately, the end of this trade war with the U.S. will not come through the courts' but rather through a new negotiated agreement. This report by The Canadian Press was first published May 29, 2025. Written by Sammy Hudes, The Canadian Press
Reuters
16-05-2025
- Business
- Reuters
G7 business leaders urge removal of trade barriers
OTTAWA, May 16 (Reuters) - Business leaders from the Group of Seven advanced economies urged member countries to lift trade restrictions and invest in critical minerals to reduce supply chain vulnerabilities, a communique released on Friday showed. Businesses and trade organizations from the G7 countries congregated in Ottawa to give their recommendations to Canada, the host country, before the G7 Leaders' Summit next month in Kananaskis, Alberta. Canada will also host a meeting of finance ministers and central bank chiefs next week as a precursor to the summit. Decades of established international trade and business relationships have been disrupted by an onslaught of import tariffs from U.S. President Donald Trump. Some countries are hashing out deals with Trump, but economists have warned that a minimum tariff will remain even if they sign trade deals with the U.S., resulting in higher prices, layoffs, lower profits and slower economic growth. "This evolving landscape demands a renewed model of economic cooperation among G7 members and like-minded countries," said Candace Laing, CEO of Canadian Chamber of Commerce and chair of the B7 business leaders' group within the G7. Countries should prioritize building resilient supply chains and bolstering the G7's competitive edge in critical and emerging technologies, she added in the communique. The joint statement recommended five focus areas for G7 leaders, including critical minerals and materials supply and investment, a sector dominated by China. It also called for the dismantling of Trump's trade barriers. "Commit to lifting current extraordinary trade restrictions among G7 members, and to a moratorium on new broad-based tariffs to avoid triggering a cycle of escalatory and retaliatory trade measures," it said. The business leaders urged the G7 leaders to harness artificial intelligence, invest in clean energy and increase global healthcare cooperation.
CTV News
12-05-2025
- Business
- CTV News
Business community eyeing new cabinet for signs Carney serious on shifting priorities
Prime Minister Mark Carney responds to a question during a news conference, in Ottawa, Friday, May 2, 2025. THE CANADIAN PRESS/Adrian Wyld OTTAWA — Canada's business community will be watching Tuesday's cabinet shuffle for signs that Prime Minister Mark Carney will be easier to work with than the last Liberal government. Experts and insiders say one of the ways Carney can emphasize that is by keeping a lean cabinet. Former prime minister Justin Trudeau's cabinet had ballooned to 40 ministers before he left office but Carney had 24 people in his first cabinet, including himself. Matthew Holmes, head of public policy at the Canadian Chamber of Commerce, says he wants to see business and international experience reflected in the new cabinet. He says the economy is facing a moment of crisis and Ottawa will need to send signals it can work quickly on enabling trade and getting major projects done quickly. Holmes also says the choice for environment minister will be 'hyper scrutinized' following Carney's ovations to the energy sector and promises to work collaboratively with Western provinces. This report by The Canadian Press was first published May 12, 2025. Kyle Duggan, The Canadian Press
