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.'
As the Bank of Canada considers ditching oversized interest rate hikes, it is dealing with an economy likely more overheated than previously thought but also the bond market's clearest signal yet that recession and lower inflation lie ahead.
Canada's central bank says that the economy needs to slow from overheated levels in order to ease inflation. If its tightening campaign overshoots to achieve that objective it could trigger a deeper downturn than expected.
The bond market could be flagging that risk. The yield on the Canadian 10-year government bond has fallen nearly 100 basis points below the two-year yield, marking the biggest inversion of Canada's yield curve in Refinitiv data going back to 1994 and deeper than the U.S. Treasury yield curve inversion.
Some analysts see curve inversions as predictors of recessions. Canada's economy is likely to be particularly sensitive to higher rates after Canadians borrowed heavily during the COVID-19 pandemic to participate in a red-hot housing market.
"Markets think the Canadian economy is about to suffer a triple blow as domestic consumption collapses, U.S. demand weakens and global commodity prices drop," said Karl Schamotta, chief market strategist at Corpay.
The BoC has opened the door to slowing the pace of rate increases to a quarter of a percentage point following multiple oversized hikes in recent months that lifted the benchmark rate to 3.75 per cent, its highest since 2008.
Money markets are betting on a 25-basis-point increase when the bank meets to set policy on Wednesday, but a slim majority of economists in a Reuters poll expect a larger move.
Canada's employment report for November showed that the labour market remains tight, while gross domestic product grew at an annualized rate of 2.9 per cent in the third quarter.
That's much stronger than the 1.5 per cent pace forecast by the BoC and together with upward revisions to historical growth could indicate that demand has moved further ahead of supply, economists say.
But they also say that the details of the third-quarter GDP data, including a contraction in domestic demand, and a preliminary report showing no growth in October are signs that higher borrowing costs have begun to impact activity.
The BoC has forecast that growth would stall from the fourth quarter of this year through the middle of 2023.
The depth of Canada's curve inversion is signaling a "bad recession" not a mild one, said David Rosenberg, chief economist and strategist at Rosenberg Research.
It reflects greater risk to the outlook in Canada than the United States due to "a more inflated residential real estate market and consumer debt bubble," Rosenberg said.
Inflation is likely to be more persistent after it spread from goods prices to services and wages, where higher costs can become more entrenched. Still, three-month measures of underlying inflation that are closely watched by the BoC - CPI-median and CPI-trim - show price pressures easing.
They fell to an average of 2.75 per cent in October, according to estimates by Stephen Brown, senior Canada economist at Capital Economics. That's well below more commonly used 12-month rates.
"The yield curve would not invert to this extent unless investors also believed that inflation will drop back down toward the Bank's target," said Brown.
Like the Federal Reserve, the BoC has a two per cent target for inflation.
"The curve is telling us the Bank of Canada will be forced into a reversal by late 2023, with rates remaining depressed for years to come," Corpay's Schamotta said.
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.