Latest news with #Bank of Canada
Globe and Mail
2 days ago
- Business
- Globe and Mail
Businesses downbeat but less worried about worst-case tariff scenario, Bank of Canada surveys find
U.S. President Donald Trump's erratic trade policy has put a chill on Canadian businesses and consumers, but fewer are expecting a worst-case tariff scenario, according to a pair of surveys published by the Bank of Canada on Monday. The quarterly pulse checks, conducted in late April and May, captured the sour mood across Canada as Mr. Trump rolled out waves of tariffs through the spring and early summer. Canadian companies said they're curtailing investment and hiring, and eating higher tariff-related costs because of weak consumer demand. Consumers said they are worried about their jobs and are delaying big purchases. Tariffs are likely here to stay. What now, for Canada? At the same time, the surveys found a sense of relief that U.S. tariffs have not bitten as hard as many feared earlier in the year when Mr. Trump was threatening across-the-board tariffs, without the exemptions that were later introduced. 'Fewer businesses are considering extremely negative scenarios in their planning,' the Bank of Canada said. This hint of optimism reinforces expectations that the central bank will hold interest rates steady for the third-consecutive time when it meets next week. After a string of better-than-expected economic data in recent weeks, financial markets are pricing a nearly 90-per-cent chance that the bank will keep its policy rate at 2.75 per cent next Wednesday, according to LSEG Data & Analytics. What happens to monetary policy going forward depends a lot on how the trade war unfolds – both the outcome of Ottawa's trade negotiations with Washington, and how tariffs end up feeding through Canada's economy and influencing business pricing decisions and consumer behaviour. Given the rapidly changing trade environment, the two Bank of Canada surveys are already dated. Since May, Mr. Trump has doubled tariffs on steel and aluminum to 50 per cent and threatened to increase tariffs on goods that don't meet free-trade-agreement rules to 35 per cent from 25 per cent. Last week, Prime Minister Mark Carney acknowledged that U.S. tariffs probably aren't going to zero, even if Ottawa can secure some reprieve. That said, the surveys highlight several dynamics that could inform where interest rates go from here. So far, U.S. tariffs and Canadian countertariffs haven't had a major impact on Consumer Price Index inflation, which came in at 1.9 per cent in June – below the central bank's 2-per-cent target. The business survey suggested that companies are having trouble raising prices. Around half of the respondents said they're facing cost pressures related to tariffs and changes to their supply chains. However, 'competitive pressures and the current weakness in demand are limiting firms' ability to pass on these costs to customers,' the Bank of Canada said. 'As a result, many businesses expect their selling prices to increase over the coming year at a similar rate as they did over the past year. Because customers are sensitive to price increases, many firms are absorbing a portion of these increased costs, compressing their profit margins in an effort to preserve market share,' the bank said. Quebec Premier says any new trade deal with the U.S. needs to have specific time frame Having spiked dramatically in the first quarter, business and consumer expectations about future inflation remain elevated, although they did level off somewhat in the second quarter. 'Worries about tariff passthrough and inflation expectations were the reasons that the Bank of Canada held rates back in June, but those look less concerning in these surveys,' Royce Mendes, head of macro strategy at Desjardins, wrote in a note to clients. 'While central bankers probably won't ease monetary policy next week, there is ample scope for them to resume their cutting cycle later in the year should the economy continue to stagnate,' he wrote. Both Bank of Canada surveys had notes of pessimism and optimism. The share of companies planning for a recession declined to 28 per cent from 32 per cent in the first quarter, and the number of companies that expected higher tariff-related costs dropped to one-third from two-thirds. That said, more companies reported that leading indicators, such as order books and sales inquiries, have deteriorated, and hiring and investment intentions remain weak. The consumer survey found that concerns about job security have eased somewhat since the first quarter. But fears of job losses remain elevated, and consumers are becoming increasingly cautious about spending on non-discretionary items. Bradley Saunders, North America economist at Capital Economics, said in a note to clients that the surveys may appear overly downbeat given when they were conducted. 'Bleak sales and spending intentions captured by the Bank of Canada's second-quarter business and consumer surveys are consistent with a sharp downturn in GDP growth,' he said. 'However, the surveys were carried out at a time of peak tariff uncertainty. Since then, the timelier monthly business and consumer surveys generally suggest that sentiment has improved as tariff escalation threats have receded.'
Bloomberg
2 days ago
- Business
- Bloomberg
‘I Won't Be Going': Canadians Explain Their US Boycott to the Central Bank
Canadians say they're ramping up their boycott of US travel and products in response to US President Donald Trump's tariffs, and the country's central bank is taking notice. For the first time ever in its quarterly survey of consumers, the Bank of Canada asked people about their plans for US trips. About 55% of Canadians said they're avoiding or spending less on vacations to US destinations, and roughly a third of said they plan to spend more on domestic travel.
Bloomberg
2 days ago
- Business
- Bloomberg
Firms See Canada Escaping Worst Tariff Outcomes, Survey Shows
By and Randy Thanthong-Knight Save Uncertainty about US President Donald Trump's trade policy is curbing Canadian business investment and consumer spending, even though firms see the economy avoiding a bad recession, central bank surveys show. In the first quarterly reports since the Bank of Canada paused rate cuts in April, businesses and consumers appear to have adopted policymakers' cautious stance amid rapidly changing tariff and trade policy. Firms slowed hiring and investment, while Canadians tightened their belts due to fear of job losses.
Bloomberg
2 days ago
- Business
- Bloomberg
Economists See Slimmer Chance of More Rate Cuts in Canada This Year
Expectations for further interest rate cuts this year from the Bank of Canada are slowly evaporating. Economists at two of Canada's largest lenders, Bank of Nova Scotia and Royal Bank of Canada, now say Governor Tiff Macklem and his officials will keep their benchmark rate at 2.75% through the end of 2025.
Yahoo
15-07-2025
- Business
- Yahoo
Nearly two-thirds of Canadians want interest rate cuts as financial anxiety grows: Poll
Following two consecutive interest rate pauses by the Bank of Canada (BoC), Canadians continue to feel financial pressure, with many stuck delaying major life goals amid ongoing economic uncertainty, according to the latest MNP Consumer Debt Index released Monday. Nearly two-thirds of Canadians (64 per cent) say they desperately need interest rates to fall, given the financial constraints they're under. Over one-third (36 percent) report feeling anxious or stressed about their financial situation, while one-quarter say they've had to stall life plans (26 per cent) or are constantly putting out financial fires due to an endless stream of unexpected costs (24 per cent). Younger adults and lower-income households are the most likely to report financial strain and feeling stalled, the survey found. 'Canadians have not witnessed such economic uncertainty since the pandemic. We see some stability in financial perception, but many households feel like their lives are on hold, stuck in a financial holding pattern as they wait for the proverbial dust to settle,' said Grant Bazian, president of insolvency firm MNP, in a statement. 'Given the persistent economic pressures and backdrop of global volatility, many are hesitant to make major financial or life decisions, unsure of what lies ahead.' In response to mounting financial pressures, 41 per cent of Canadians have reduced discretionary spending, 33 per cent are increasing savings or building emergency funds, and 27 per cent are prioritizing debt repayment. Nearly one-quarter (23 per cent) are putting life goals on hold, such as buying a home, starting a family or changing careers. Canadians aged 18 to 34 are most likely to postpone these milestones. Over one-third of Canadians (41 per cent) fear that rising interest rates could drive them towards bankruptcy. And, even if rates were to decline, 45 per cent of Canadians remain concerned about their ability to repay debt. According to Bazian, approximately 14 million Canadians say they are close to insolvency. 'There are some persistent fears around interest rates,' he said. 'For some households, the damage has already been done. After years of rising costs, high interest rates and depleted savings, there may be some deep anxieties about what could still be to come.' Even economists are divided on what the Bank of Canada will do next, Yahoo Finance Canada previously reported. In June, economists at Royal Bank and Scotiabank forecast there will be no further rate cuts in 2025, while economists at BMO and Desjardins Group, alternatively, expect a further 75 basis points of cuts by the end of 2025 or early 2026, which would bring the BoC's overnight rate to two per cent. Amid ongoing uncertainty, more Canadians appear to be building financial buffers to safeguard against future economic disruptions. The average amount households have left at month-end has risen to $916, up from just $49 last quarter — the second-highest level since MNP began tracking this data in 2017. The largest increases were among Canadians aged 55 and older (up $84) and middle- to higher-income households. Those earning between $60,000 and $100,000 saw the biggest gains (up $260), followed by households earning over $100,000 (up $129). 'These are small but encouraging signs that some households may be regaining a bit of financial footing,' Bazian said. 'While challenges remain, any movement towards greater stability is meaningful in this environment.' 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
