Canadian inflation excluding food and energy costs is expected to remain above 3% until the fourth quarter of this year, the median forecast of seven economists recently surveyed by Reuters showed, which could dash hopes of an early Bank of Canada shift to cutting interest rates, Reuters reported. The readings for core, or underlying, inflation, such as the widely-tracked Consumer Price Index excluding food and energy, are showing greater persistence than the headline rate after price pressures spread from goods into slower-moving items, such as wages and services.
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The Bank of Canada will hold interest rates at the 15-year high 4.50% until the end of 2023, before starting to cut rates at the start of next year, a median of market participants said in the central bank's survey released on Monday, Reuters reported. The survey, the second iteration of the poll of market participants first released in February, showed a median of the participants forecasting interest rates dropping to 3.00% by the end of 2024. Market participants in the first survey released in February had said rates would fall to 4.0% by the end of the year.
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Inflation drifted lower to the slowest pace in nearly two years, a reprieve for the Bank of Canada amid a jobs market and economy that continue to defy expectations for a stall, Bloomberg News reported. The consumer price index rose 4.3% in March from a year ago, the lowest headline number since August 2021, Statistics Canada reported Tuesday in Ottawa. That matched expectations in a Bloomberg survey of economists and was down from 5.2% in February. On a monthly basis, the index rose 0.5% in March, also matching economist forecasts.
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Canadian Pacific Railway Ltd. has emerged as an unlikely target for a few distressed-debt investors. It wasn’t because of the railroad operator’s creditworthiness, but rather because rising interest rates pummeled the value of some of its bonds in recent months ahead of its roughly $30 billion acquisition of U.S. rival Kansas City Southern, according to a WSJ Pro Bankruptcy commentary. Canadian Pacific sold bonds in December 2021 to finance the acquisition, including $2.4 billion in notes due 2031 and 2041, with coupons of 2.45% and 3%, respectively.
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Canada’s recent moves to impose stricter rules on crypto companies show that US regulators have allies in cracking down on the asset class after last year’s turmoil, Bloomberg News reported. Canadian securities regulators in February gave a 30-day deadline for unregistered crypto trading platforms operating in the country to commit to a so-called pre-registration undertaking. Firms are required to follow tougher regulations on segregating customer assets and prohibited from offering margin or leverage to users in Canada.
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Interest rates in Canada may have to stay restrictive for longer to ensure inflation declines to the Bank of Canada's 2% target, Governor Tiff Macklem said on Wednesday, Reuters reported. Macklem, speaking after the bank announced that it was holding its key rate at 4.50%, said the central bank's governing council had discussed whether rates had been raised enough. Macklem said that while the bank was encouraged inflation was dropping, the job of monetary policy was not done.
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The Bank of Canada is expected to take in stride surprising recent economic strength and leave interest rates unchanged at its meeting on Wednesday, pinning its hopes on activity cooling as higher borrowing costs sink in, analysts said, Reuters reported. Last month, the Bank of Canada became the first major global central bank to pause its rate-hiking campaign, after lifting its benchmark rate to a 15-year high of 4.50%. It said no further tightening would be needed if the economy slows, or even moves into a slight recession, as it expects.
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Canadian dealmakers are optimistic about a return to strength in the second half of the year after mergers and acquisitions (M&A) in the first quarter dropped to pandemic levels, belayed by higher borrowing costs and panic around a banking crisis, Reuters reported. The collapse of regional banks Silicon Valley Bank and Signature Bank in the U.S. tightened credit market making funding difficult for deals.
Turns out, the biggest short in the banking industry anywhere in the world isn’t in Switzerland or Silicon Valley, but rather in the relatively tame financial center of Canada, Bloomberg reported. In recent weeks, short-sellers have upped their bearish bets against Toronto-Dominion Bank, and now have roughly $3.7 billion on the line vis-à-vis Canada’s second-largest lender, according to an analysis by S3 Partners. That’s the most among financial institutions globally and puts TD ahead of the likes of France’s BNP Paribas SA and Bank of America Corp.
The Bank of Canada was concerned about inflation sticking above its 2% target and agreed there might be a need to tighten monetary policy further when officials decided to leave rates on hold this month, Reuters reported. On March 8, the bank became the first major central bank to pause its tightening campaign, leaving the key overnight interest rate on hold at 4.50%.
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