Indian envoy warns of 'big red line,' days after charges laid in Nijjar case
India's envoy to Canada insists relations between the two countries are positive overall, despite what he describes as 'a lot of noise.'
The Canadian bond market is coming to the view that expected multiple interest rate hikes in 2022 by the Bank of Canada, including one potentially this week, will bring price pressures under control, albeit at a cost of slower economic growth.
This marks a shift in perception that is underscored by moves in the so-called inflation breakeven rate, a market measure of inflation expectations. The 10-year breakeven rate has dropped below 1.9 per cent this month after touching 2.3 per cent in November, its highest level by far in data going back to 2015.
In contrast, recent survey data from the Canadian central bank showed that expectations for price increases among consumers and businesses have climbed.
Lowering of inflation expectations give businesses greater confidence to pursue their growth plans.
"With the market pricing in an aggressive Bank of Canada tightening cycle, it implies that inflation is less likely to remain elevated in future years," said Andrew Kelvin, chief Canada strategist at TD Securities.
Money markets see a 65 per cent chance that Canada's central bank will raise its benchmark interest rate, which currently sits at 0.25 per cent, in a policy announcement on Wednesday despite uncertainty triggered by the Omicron variant of the coronavirus. It would be the first rate hike since October 2018.
Investors expect six hikes in total this year, which would lift the policy rate to its pre-pandemic level of 1.75 per cent. The expected number of increases is up from four in December and two more than markets expect from the Federal Reserve.
The urgency that the market sees for the BoC to start tightening comes as Canadian inflation, which hit a 30-year high of 4.8 per cent in December, threatens to overshoot the central bank's 2 per cent target for longer by feeding expectations for future price increases.
Signs of an overheated Canadian housing market could also concern the central bank after data for December showed the average selling price of a home was up nearly 18 per cent from a year earlier.
But the potential for an easing in supply-chain disruptions later this year could reduce price pressures, say economists, while past increases in energy prices will fall out of the inflation calculation over time.
"Central banks in Canada and the United States are winning the psychological war, successfully convincing investors that they are serious about fighting inflation" said Karl Schamotta, chief market strategist at Cambridge Global Payments.
Bank of Canada Governor Tiff Macklem said in December that slack in Canada's economy caused by the coronavirus pandemic has substantially diminished, a key sign the central bank would begin hiking rates soon. The Fed has also turned more hawkish.
Both central banks tend to raise rates in 25-basis-point increments but could move faster.
Some time after the first hike, the BoC is expected to begin quantitative tightening, or QT, reducing the amount of bonds on its balance sheet that were bought during the pandemic to support the economy.
The combination of QT and rate hikes could weigh on economic activity, particularly after Canadians increased borrowing during the pandemic.
Household credit market debt was C$2.6 trillion in the third quarter of 2021, or about 177 per cent as a share of income, up 10 per cent from the final quarter of 2019.
But employment has climbed above its pre-pandemic level and people have accumulated an unprecedented amount of savings.
Economists estimate that the increase in savings over the pre-pandemic trend could be nearly C$300 billion, or about 20 per cent of annual spending.
Tightening "doesn't need to imply a painful economic period," Kelvin said. "It means that the period of above-trend growth probably comes to an end in the next two years."
(Reporting by Fergal Smith Editing by Denny Thomas and Paul Simao)
India's envoy to Canada insists relations between the two countries are positive overall, despite what he describes as 'a lot of noise.'
With Donald Trump sitting just feet away, Stormy Daniels testified Tuesday at the former president's hush money trial about a sexual encounter the porn actor says they had in 2006 that resulted in her being paid to keep silent during the presidential race 10 years later.
The U.S. paused a shipment of bombs to Israel last week over concerns that Israel was approaching a decision on launching a full-scale assault on the southern Gaza city of Rafah against the wishes of the U.S.
Footage from dozens of security cameras in the area of Drake’s Bridle Path mansion could be the key to identifying the suspect responsible for shooting and seriously injuring a security guard outside the rapper’s sprawling home early Tuesday morning, a former Toronto homicide detective says.
A chicken farmer near Mattawa made an 'eggstraordinary' find Friday morning when she discovered one of her hens laid an egg close to three times the size of an average large chicken egg.
Susan Buckner, best known for playing peppy Rydell High School cheerleader Patty Simcox in the 1978 classic movie musical 'Grease,' has died. She was 72.
Accused killer Jeremy Skibicki could have a challenging time convincing a judge that he is not criminally responsible for the deaths of four Indigenous women, a legal analyst says.
A Calgary bylaw requiring businesses to charge a minimum bag fee and only provide single-use items when requested has officially been tossed.
Two Nova Scotia men are dead after a boat they were travelling in sank in the Annapolis River in Granville Centre, N.S., on Monday.
An Ontario man says he paid more than $7,700 for a luxury villa he found on a popular travel website -- but the listing was fake.
Whether passionate about Poirot or hungry for Holmes, Winnipeg mystery obsessives have had a local haunt for over 30 years in which to search out their latest page-turners.
Eighty-two-year-old Susan Neufeldt and 90-year-old Ulrich Richter are no spring chickens, but their love blossomed over the weekend with their wedding at Pine View Manor just outside of Rosthern.
Alberta Ballet's double-bill production of 'Der Wolf' and 'The Rite of Spring' marks not only its final show of the season, but the last production for twin sisters Alexandra and Jennifer Gibson.
A mother goose and her goslings caused a bit of a traffic jam on a busy stretch of the Trans-Canada Highway near Vancouver Saturday.
A British Columbia mayor has been censured by city council – stripping him of his travel and lobbying budgets and removing him from city committees – for allegedly distributing a book that questions the history of Indigenous residential schools in Canada.
Three men in Quebec from the same family have fathered more than 600 children.
A group of SaskPower workers recently received special recognition at the legislature – for their efforts in repairing one of Saskatchewan's largest power plants after it was knocked offline for months following a serious flood last summer.
A police officer on Montreal's South Shore anonymously donated a kidney that wound up drastically changing the life of a schoolteacher living on dialysis.