Community mourns victims of fatal boat crash near Kingston, Ont.
The three people killed in last weekend's tragic collision between a speedboat and a fishing boat north of Kingston are being remembered Friday.
The U.S. Federal Reserve could increase the size of its interest rate hikes and raise borrowing costs to higher levels than previously projected if evidence continues to point to a robust economy and persistently high inflation, Chair Jerome Powell told a Senate panel Tuesday.
"The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated," Powell testified to the Senate Banking Committee. "If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes."
Powell's comments raise the possibility that the Fed will increase its key interest rate by a half-percentage point at its next meeting March 21-22, after having carried out a quarter-point hike in early February. The Fed previously raised its benchmark rate by a half-point in December and imposed four three-quarter-point hikes before that. Over the past year, the central bank has raised its key rate, which affects many consumer and business loans, eight times.
The Fed chair's warning of potentially more aggressive hikes led some economists to pencil in higher rates for later this year than they had previously estimated. It also darkened the mood on Wall Street, where stock prices fell sharply in the hours after Powell began speaking. In mid-day trading, the broad S&P 500 index was down a sizable1.2%.
The prospect of increasingly high borrowing costs tends to generate concern among economists and investors. Rising rates can not only cool consumer and business spending, weaken growth and slow inflation; they can also send the economy sliding into a recession.
The Fed had been expected to announce another quarter-point rate increase at its next meeting later this month. But traders and some analysts now see it as more likely that the Fed will implement a half-point hike.
"The presumption that's been established is that they will hike (a half-point) in March, unless they are convinced otherwise," said Derek Tang, an economist at LHMeyer, an economic consulting firm.
At their forthcoming meeting, Fed officials will also issue updated forecasts for how high they expect their benchmark rate to ultimately reach.
During Tuesday's hearing, Democratic senators stressed their belief that today's high inflation is due mainly to the combination of continued supply chain disruptions, Russia's invasion of Ukraine and higher corporate profit margins. Several argued that further rate hikes would throw millions of Americans out of work.
Sen. Elizabeth Warren, Democrat of Massachusetts, noted that Fed officials have projected that the unemployment rate will reach 4.6% by the end of this year, from 3.4% now. Historically, when the jobless rate has risen by at least 1 percentage point, a recession has followed, she noted.
"If you could speak directly to the 2 million hardworking people who have decent jobs today, who you're planning to get fired over the next year, what would you say to them?" Warren asked.
"We actually don't think that we need to see a sharp or enormous increase in unemployment to get inflation under control," Powell responded. "We're not targeting any of that."
By contrast, the committee's Republicans mainly blamed U.S. President Joe Biden's policies for high inflation and argued that if government spending were cut, inflation would slow.
"If Congress reduced the rate of growth in its spending, and reduced the rate of growth in its debt accumulation, it would make your job easier in reducing inflation?" Sen. John Kennedy, Republican of Louisiana, asked.
"I don't think fiscal policy right now is a big factor driving inflation," Powell responded. But he also acknowledged that if Congress reduced the deficit, that "could" help slow price increases.
Powell walked back some of the optimistic comments about declining inflation he had made after the Fed's Feb. 1 meeting, when he noted that "the disinflationary process has started" and he referred to "disinflation" -- a broad and steady slowdown in inflation -- multiple times. At that time, year-over-year consumer price growth had slowed for six straight months.
But after that meeting, the latest reading of the Fed's preferred inflation measure showed that consumer prices rose from December to January by the most in seven months. And reports on hiring, consumer spending and the broader economy have also indicated that growth remains healthy.
Such economic figures, Powell said Tuesday, "have partly reversed the softening trends that we had seen in the data just a month ago."
The Fed chair also said that inflation "has been moderating in recent months" but added that "the process of getting inflation back down to 2 percent has a long way to go and is likely to be bumpy." Inflation, as measured year over year, has slowed from its peak in June of 9.1% to 6.4%.
Several Fed officials said last week that they would favor raising the Fed's key rate above the 5.1% level they had projected in December if growth and inflation stay elevated.
Powell noted that so far, most of the slowdown in inflation reflects an unravelling of supply chains that have allowed more furniture, clothes, semiconductors and other physical goods to reach U.S. shores. By contrast, inflation pressures remain entrenched in numerous areas of the economy's vast service sector.
Rental and housing costs, for example, remain a significant driver of inflation. At the same time, the cost of a new apartment lease is growing much more slowly, a trend that should reduce housing inflation by mid-year, Powell has said.
But the prices of many services -- from dining out to hotel rooms to haircuts -- are still rising rapidly, with little sign that the Fed's rate hikes are having an effect. Fed officials say the costs of those services mainly reflect rising wages and salaries, which companies often pass on to their customers in the form of higher prices.
As a result, the Fed's monetary policy report to Congress, which it publishes in conjunction with the chair's testimony, said that quelling inflation will likely require "softer labour market conditions" -- a euphemism for fewer job openings and more layoffs.
Senators from both parties also asked Powell about the Fed's view on cryptocurrencies and what steps it has taken as a financial regulator on digital assets.
"What we see is, you know, quite a lot of turmoil," Powell said. "We see fraud, we see a lack of transparency, we see run risk, lots and lots of things like that."
As a result, Powell said, the Fed is encouraging the banks it oversees to take "great care in the ways that they engage with the whole crypto space."
At the same time, he said, "We have to be open to the idea that somewhere in there, there's technology that can be featured in productive innovation that makes people's lives better."
The three people killed in last weekend's tragic collision between a speedboat and a fishing boat north of Kingston are being remembered Friday.
The family of one of the victims of the Humboldt Broncos bus crash in 2018 says they are 'thankful' for a decision by a Calgary immigration board to deport the driver of the truck involved.
Health Canada, Transport Canada and the Canadian Food Inspection Agency (CFIA) issued various recalls this week. Here's what you need to know.
An emotional outburst in a London, Ont. courtroom Friday disrupted the sentencing hearing of a woman who pleaded guilty for her part in the death of 29-year-old Mohammed Abdallah.
American Airlines has replaced the law firm that told a judge a nine-year-old girl was negligent in not noticing there was a camera phone taped to the seat in an airplane lavatory.
Luciano Benetton, a co-founder of the apparel brand, announced he was stepping down as chairman in an interview published on Saturday with Milan daily Corriere della Sera. He blamed current management for losses of 100 million euros (US$108.5 million) that he discovered last year.
Three people have died after a vehicle veered off the road in Shediac N.B., Friday morning.
Exhausted and short on options after consulting two veterinary clinics, Kristie Pereira made the gut-wrenching decision last year to take her desperately ill puppy to a Maryland shelter to be euthanized.
A man is dead, and three others are in hospital after a flying wheel crashed into a coach bus on the QEW in St. Catharines.
When one is extended an invitation to the Royal Garden Party in London, England, there's undoubtedly no shortage of pomp and circumstance. Barrie, Ont. natives Megan Kirk Chang and her husband Brandon experienced just that as they entered the prestigious event hosted at Buckingham Palace on Tuesday.
An unlikely celebrity emerged from social media to cheer on the Edmonton Oilers as they face the Dallas Stars tonight in Game 1 of the Western Conference Finals.
The proprietors of Regina's sole discount theatre are aware they're carrying on a significant legacy.
When Jujhar Mann said he wanted to be a pastry chef on a grade school career project, he didn't imagine that pursuing his dream would land him on a popular Netflix baking competition.
A city known for its history, ties to outer space and southern barbecue, is also home to a Winnipeg chef dishing out dozens of perogies.
A Montreal photographer captured the moment a Canada goose defended itself from a fox at the Botanical Garden.
Public libraries in Atlantic Canada are now lending a broader range of items.
Flashes of purple darting across the sky mixed with the serenading sound of songs will be noticed more with spring in full force in Manitoba.
Catching 'em all with impressive speed, a 7-year-old boy from Windsor, Ont. who only started his competitive Pokémon journey seven months ago has already levelled up to compete at a world championship level.