Latest news with #PromitMukherjee
Yahoo
3 days ago
- Business
- Yahoo
Bank of Canada: some firms see less chance of a worst-case tariffs scenario
By Promit Mukherjee and David Ljunggren OTTAWA, June 5 (Reuters) - Canadian firms and industry associations affected by trade tensions are less worried about a worst-case scenario involving U.S. tariffs but are set to raise prices, the Bank of Canada said on Thursday. The central bank left rates unchanged for the second time in a row on Wednesday, saying it needed more certainty about the effect of the tariffs. Deputy Governor Sharon Kozicki said that in a bid to get as much data as possible about how the economy was doing, the bank had also reached out to a group of firms and associations she said were particularly affected by trade tensions. "Overall, firms believed that their worst-case tariff scenarios were much less likely to materialize than they reported earlier this year," she said in a speech in Toronto. "While uncertainty remains high, there was less talk of catastrophic outcomes," she continued. The consultations, which took place from mid-April to mid-May, followed an earlier round in January. Kozicki though said the tariffs had already started impacting firms' performances and they were finding it hard to formulate their outlooks. "Most businesses expect activity to weaken in the near-term, which puts jobs at risk. In addition, firms spoke about their costs increasing, which likely means they will need to raise prices at some point," she said. The feedback from the consultations was part of the data and analysis the bank considered before holding rates. It said it would consider a rate cut in future if growth weakened and inflation stayed under control. Money markets are betting close to 60% chance of a hold once again on July 30 when the bank announces its decision and releases its quarterly monetary policy report. In April, the bank had provided two scenarios for economic growth where the second assumed a global trade war and recession. Governor Tiff Macklem on Wednesday said since the scenarios had been issued, the bank felt the chances of the second scenario taking place had diminished to some extent. Economists anticipate between two and three 25 basis point cuts this year, which could take the interest rates down to 2% by year end. Kozicki said that besides hard data sets, the bank would rely on surveys of businesses and consumers as well as consultations with industry groups in deciding the future trajectory of rates. The bank will be holding around 11 community visits this year and a little fewer than the 100 round tables, bilateral meetings and consultations it arranged last year. ((Reuters Ottawa bureau)) Keywords: CANADA CENBANK/
Reuters
4 days ago
- Business
- Reuters
-Bank of Canada holds key rate steady, but says a future cut is possible
By Promit Mukherjee and David Ljunggren OTTAWA, June 4 (Reuters) - The Bank of Canada on Wednesday held its key benchmark rate at 2.75%, citing the need to probe the effects of U.S. trade policy, but said another cut might be necessary if the economy weakened in the face of tariffs. The decision marks the second time in a row that the central bank has remained on the sidelines after an aggressive cutting cycle which shrunk rates by 225 basis points over nine months. "The trade conflict initiated by the United States remains the biggest headwind facing the Canadian economy," Governor Tiff Macklem told a news conference, describing U.S. trade policy as highly unpredictable. "There was a clear consensus to hold policy unchanged as we gain more information," he said. U.S. President Donald Trump on Wednesday doubled the tariff on imports of Canadian steel and aluminum to 50%. The bank says it is weighing upward pressure on inflation from higher prices and downward pressure from sluggish growth. Macklem said the Canadian economy had been softer but not sharply weaker, while noting that underlying inflation might be stronger than the bank had suspected. "On balance, members thought there could be a need for a reduction in the policy rate if the economy weakens in the face of continued U.S. tariffs and uncertainty, and cost pressures on inflation are contained," he said. Canada's annual inflation rate fell to 1.7% in April due to a drop in energy prices, but closely tracked core measures of inflation rose above the bank's target range of 1% to 3% in the same month. "Higher core inflation can be partly attributed to higher goods prices, including food, and may reflect the effects of trade disruption," Macklem said. Economists had predicted the bank would most likely hold its key policy rate in June, seeking to prevent higher inflation. Macklem said recent surveys showed consumers were bracing for higher prices and many businesses say they intend to pass on tariff costs. Lingering uncertainty on the impact of tariffs, the outcome of trade negotiations and new trade actions means the bank will be less forward looking, Macklem said, repeating his comments from April. "Faced with unusual uncertainty, Governing Council is proceeding carefully, with particular attention to the risks," he said, adding that the BoC would continue to support economic growth while ensuring inflation remained under control. First quarter growth was better than expected but the business investment and domestic spending were largely subdued. Economists predict this trend is likely to continue, and Macklem said second quarter growth would be substantially weaker. (Reuters Ottawa editorial) Keywords: CANADA CENBANK/
Yahoo
4 days ago
- Business
- Yahoo
UPDATE 1-Bank of Canada holds key rate steady, but says a future cut is possible
By Promit Mukherjee and David Ljunggren OTTAWA, June 4 (Reuters) - The Bank of Canada on Wednesday held its key benchmark rate at 2.75%, citing the need to probe the effects of U.S. trade policy, but said another cut might be necessary if the economy weakened in the face of tariffs. The decision marks the second time in a row that the central bank has remained on the sidelines after an aggressive cutting cycle which shrunk rates by 225 basis points over nine months. "The trade conflict initiated by the United States remains the biggest headwind facing the Canadian economy," Governor Tiff Macklem told a news conference, describing U.S. trade policy as highly unpredictable. "There was a clear consensus to hold policy unchanged as we gain more information," he said. U.S. President Donald Trump on Wednesday doubled the tariff on imports of Canadian steel and aluminum to 50%. The bank says it is weighing upward pressure on inflation from higher prices and downward pressure from sluggish growth. Macklem said the Canadian economy had been softer but not sharply weaker, while noting that underlying inflation might be stronger than the bank had suspected. "On balance, members thought there could be a need for a reduction in the policy rate if the economy weakens in the face of continued U.S. tariffs and uncertainty, and cost pressures on inflation are contained," he said. Canada's annual inflation rate fell to 1.7% in April due to a drop in energy prices, but closely tracked core measures of inflation rose above the bank's target range of 1% to 3% in the same month. "Higher core inflation can be partly attributed to higher goods prices, including food, and may reflect the effects of trade disruption," Macklem said. Economists had predicted the bank would most likely hold its key policy rate in June, seeking to prevent higher inflation. Macklem said recent surveys showed consumers were bracing for higher prices and many businesses say they intend to pass on tariff costs. Lingering uncertainty on the impact of tariffs, the outcome of trade negotiations and new trade actions means the bank will be less forward looking, Macklem said, repeating his comments from April. "Faced with unusual uncertainty, Governing Council is proceeding carefully, with particular attention to the risks," he said, adding that the BoC would continue to support economic growth while ensuring inflation remained under control. First quarter growth was better than expected but the business investment and domestic spending were largely subdued. Economists predict this trend is likely to continue, and Macklem said second quarter growth would be substantially weaker. (Reuters Ottawa editorial) Keywords: CANADA CENBANK/ 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
Yahoo
4 days ago
- Business
- Yahoo
Bank of Canada most likely to hold rates after rise in core inflation, GDP surprise
By Promit Mukherjee OTTAWA (Reuters) -The Bank of Canada is expected to hold interest rates at 2.75% on Wednesday, with rising core measures of inflation and better-than-expected gross domestic product growth in the first quarter seen pushing policymakers towards a pause. According to a majority of economists in a Reuters poll, the BoC will hold interest rates at its June meeting, but at least two more cuts are likely this year. Economists said the bank will likely adopt a wait-and-see approach as the impact of tariffs imposed by U.S. President Donald Trump plays out on the Canadian economy. "While growth has been soft and the labor market has been deteriorating, firm underlying inflation measures and trade policy uncertainty are likely to give the BoC some pause," said David Doyle, head of economics at Macquarie. Canada's annual inflation rate fell to 1.7% in April due to a drop in energy prices, but closely tracked core measures of inflation rose above the bank's target range of 1% to 3% in the same month. The bank paused its rate-cutting cycle in April after seven cuts in a row, as a 225-basis-point reduction over a space of nine months helped prepare the economy to withstand the impact of tariffs. GDP growth also surprised in the first quarter, taking away some incentive to cut rates, economists said. First-quarter gross domestic product grew by 2.2% on an annualized basis driven by exports to the U.S., data showed last week, helping shrink expectations of a rate cut in June. Currency swap markets show the odds for no cut on Wednesday now stand at close to 78%. However, there are signs that tariff impacts are starting to take a toll on the economy, prompting some economists to call for a cut. Domestic consumption was practically absent in the first quarter, an advance estimate of April GDP was not encouraging and the unemployment rate rose to 6.9% in April, the highest since November. "It would be prudent for the Bank of Canada to cut... to get ahead of what is clearly a weakening economy in Canada," said Randall Bartlett, senior director of Canadian economics at Desjardins. 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
Yahoo
30-05-2025
- Business
- Yahoo
Canada first-quarter GDP expands by 2.2% annualized rate, beating estimates
By Promit Mukherjee OTTAWA (Reuters) -Canada's economy grew faster than expected in the first quarter, data showed on Friday, primarily driven by exports as companies in the United States rushed to stockpile Canadian goods before President Donald Trump's tariffs were implemented. But an increase in imports that led to inventory build-up, lower household spending and weaker final domestic demand indicate that the economy struggled on the domestic front. Economists have warned that as U.S. tariffs on Canada continue, this trend will persist. The gross domestic product in the first quarter grew by 2.2% on an annualized basis compared with the downwardly revised 2.1% growth posted in the previous quarter, Statistics Canada said. This is the final economic indicator before the Bank of Canada's rates decision on Wednesday and will help determine whether the central bank will cut or stay pat on rates. Currency swap markets increased their bets for a pause in rates to 82% after the data was released from 75% earlier. Benchmark interest rates are currently at 2.75%. Trump's repeated threats and flip-flops on tariffs since the beginning of the year led to an increase in exports and imports to and from the United States. Trump imposed tariffs on Canada in March, first on a slew of products and later specifically on steel and aluminum. The GDP grew by 0.1% in March after a contraction of 0.2% in February. The economy is expected to expand by 0.1% in April, the statistics agency said, referring to a flash estimate. The March growth was primarily driven by a rebound in the mining, quarrying, and oil and gas extraction and construction sectors. Analysts polled by Reuters had expected first-quarter GDP to expand by 1.7% and by 0.1% in March. The quarterly GDP figure is calculated based on income and expenditure while the monthly GDP is derived from industrial output. The Canadian dollar firmed and was trading up 0.07% to 1.3799 to the U.S. dollar, or 72.47 U.S. cents. Two-year government bond yields were up 1.7 basis points to 2.62% after the data was released. "There's no real sign of distress in the economy from the GDP figures and I think that's the most important message," said Doug Porter, chief economist at BMO Capital Markets. "I think this heavily reduces the chances of the Bank of Canada cutting next week," he added. The tariffs and the uncertainty around them started showing early signs of impact as the final domestic demand, which represents total final consumption expenditures and investment in fixed capital, did not increase for the first time since the end of 2023, Statscan said. Growth in household spending also slowed to 0.3% in the first quarter, after rising 1.2% in the prior quarter. A rise in exports led the first-quarter growth, jumping by 1.6% after increasing by 1.7% in the fourth quarter of 2024. Business investment in machinery and equipments also increased by 5.3%, which pushed the quarterly GDP higher. Sign in to access your portfolio
