Live Updates: Bank of Canada set for sixth interest rate hike

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9:25 a.m.

Twitter Space: How can young Canadians prepare for an economic downturn?

The interest rate hike scheduled for this morning is a move that could also push Canada further into recession.

For many young Canadians, this economic downturn is a first, and it only worsens an already difficult financial situation. So how should Gen Z and Millennials prepare financially? What will rising rates mean for the housing market? Is it the right time to invest? And what are the best strategies for saving even with high inflation?

Later today, at 2 p.m. ET, join The Globe and Mail for a Twitter Live Space with Menaka Raman-Wilms, host of The Decibel daily news podcast. Globe personal finance editors Rob Carrick and Erica Alini, along with personal finance expert Melissa Leong, will answer all your questions about housing, debt, saving and investing.

Our panelists will also answer questions from listeners during the conversation. You can also send them in advance to [email protected] or send us a direct message on Twitter.

– Globe Staff

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8:45 am

Rate hikes are starting to have a negative impact on the Canadian labor market

Persistent interest rate hikes are beginning to cost Canada jobs, even as some sectors of the economy continue to experience labor shortages, according to a new report that analyzes the effects of rate hikes of the Bank of Canada on workers.

Between May and September of this year, the Canadian economy lost nearly 100,000 jobs, almost all of them full-time. The only times in the past when an equivalent number of jobs were lost over a four-month period were during recessions, said Jim Stanford, lead author of the report and director of the Vancouver-based Center for Future Work, a think tank.

“We saw these signals of job loss during the recessions of the early 1980s, during the financial crisis of 2008-09 and more recently in the early stages of the COVID pandemic,” Dr Stanford said. “It is obviously a sign that the demand for labor is decreasing or cooling considerably.”

The shift in the labor market comes amid one of the Bank of Canada’s fastest rate hike cycles on record, a calculated effort to quell inflation by raising borrowing costs for households. and businesses.

Read the full story.

– Vanmala Subramaniam

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8:10 a.m.

How the Bank of Canada “lock” works

On days like today, when the central bank releases both a rate decision and a Monetary Policy Report (this happens four times a year), reporters arrive at the Bank of Canada’s headquarters just down the street from the Parliament Buildings, as early as 7 a.m. ET for a “lockdown.” They receive copies of the rate announcement (usually a few paragraphs) and MPR (about 30-40 pages) in advance. The quarterly report is the bank’s most important policy document and includes the bank’s latest economic forecasts as well as a detailed discussion of the current economic climate, the bank’s expectations and key risks ahead.

Journalists are not allowed to leave the room before 10 a.m. ET, their exit time, and their communications are cut off with the outside world. During the closed session, representatives of the Bank of Canada brief journalists on the main elements of the RPM.

At 11 a.m. ET, Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers hold a press conference, which usually lasts about 45 minutes. It will begin with an approximately 10-minute “opening statement,” read by the Governor, which provides additional context to the rate decision. The opening statement has become an important document in recent years, as the bank has used it to provide public insight into the deliberations of the bank’s governing council (the governor and his deputy governors) as they debated their main concerns and come to a decision. . This is followed by questioning of reporters both in the room and participating by conference call.

Following the press conference, Mr. Macklem will conduct two media interviews – one with a television station, the other with a news agency – covering both official languages. Bank staff will also provide briefings to participants in key markets, similar to the morning briefing for journalists, to provide additional color to the rate decision and MPR.

–David Parkinson

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7:30 a.m.

Will this be the time when the Bank of Canada changes its tone?

The big question of the day is not whether the Bank of Canada will raise its key rate again – it absolutely will. What is less certain is by how much. After increases of a full percentage point in July and 0.75 percentage points in September, there was a feeling that the bank might be ready to slow the pace to 0.5 percentage points, perhaps in with a view to pausing increases for some time in the new year. But the bank’s rhetoric hardened ahead of the move, while inflation data did not make a compelling case for rate easing. Markets are tilting for another 0.75 percentage point rise, though economists are more evenly split.

Along with the rate hike, I will be looking for any changes in the bank’s language that might suggest they are going to slow down or take a break. I will pay particular attention to even small and subtle restatements – the bank is usually very coy about its rate outlook.

After that, the big news will be the new economic forecasts from the central bank. Since the bank’s last quarterly update in July, the outlook for global growth has deteriorated markedly. Several Canadian private sector economists are now predicting a Canadian recession next year. The Bank of Canada will certainly revise its growth projection downwards – it’s hard not to, given the international economic climate – but how much will it cut its 1.8% forecast for 2023? Will the bank actually start to factor a contraction into its projections? Less than two weeks ago, Mr. Macklem was still talking about the possibility of a “soft landing” – a downturn that doesn’t turn into a recession – although he acknowledges that the odds of such an outcome are diminishing. Is this the time when the bank changes its tune?

With the bank’s focus on fighting inflation, I’ll be looking for anything that sheds light on how the bank thinks this is going. As the bank observes a public communications blackout for eight days ahead of the release of the decision and MPR, this will be its first opportunity to share its views on the September inflation report, which Statistics Canada released. A week ago.

–David Parkinson

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6:45 am

Why is everyone talking about the Bank of Canada?

For a good part of 40 years, Canadians did not have to think much about the Bank of Canada. Over the past year, it has become impossible to ignore.

Inflation rose for the first time in decades, cutting wages and eroding the purchasing power of the dollar. Monetary policy has become a hot political topic. Conservative Leader Pierre Poilievre has said he will fire Bank of Canada Governor Tiff Macklem, while NDP Leader Jagmeet Singh has begun to publicly criticize the bank’s aggressive rate hike path.

Since March, the central bank has raised borrowing costs five times – with another sharp rate hike expected on Wednesday. This makes it more expensive for households to get mortgages and for businesses to get loans. The housing market is collapsing, businesses and consumers are getting jittery, and a growing number of economists are predicting a recession next year.

So why is the Bank of Canada raising interest rates? What’s going on with inflation? And what control does the government have over the central bank? Read our explainer.

–Marc Rendell

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6:30 a.m.

Bank of Canada expects another big hike in interest rates

The Bank of Canada is set to make its sixth consecutive rate hike this morning, continuing to raise borrowing costs for Canadians in an effort to keep inflation under control.

The announcement will be at 10 a.m. ET. On Tuesday afternoon, financial markets were predicting a 70% chance that the bank would raise its benchmark policy rate by 0.75 percentage points. This would take the key rate to 4% for the first time since the start of 2008. Some analysts are expecting a weaker variation of 0.5 percentage point.

Governor Tiff Macklem has been unambiguous in recent weeks that interest rates must continue to rise. Consumer price index inflation was 6.9% in September, more than three times the Bank of Canada’s 2% target.

Headline inflation has slowed in recent months, thanks to falling gasoline prices. But a growing number of goods and services are seeing outrageous price increases – a sign that the bank’s aggressive rate hike campaign hasn’t broken the momentum of inflation.

“We haven’t yet seen a clear turn in underlying inflation,” Macklem told reporters two weeks ago in his final public remarks ahead of the rate decision. He said the economy is “overheating” and it will take a period of weaker economic growth and weaker labor markets to bring inflation back to its target.

The bank raised its key rate to 3.25% from 0.25% this year in one of the fastest rate hike cycles on record. Many analysts believe the bank is nearing the end of its rate hike campaign and will be watching for clues on future rate hikes.

The bank will also release its quarterly monetary policy report today, which will contain updated forecasts for economic growth and inflation.

Analysts expect a downgrade in growth next year. They will watch whether the bank continues to refer to a possible “soft landing” – a scenario where inflation falls without a spike in unemployment or a sustained economic contraction. A growing number of private sector economists – including Mr. Macklem’s predecessors, Stephen Poloz and Mark Carney – are now predicting that the Canadian economy will slide into recession next year.

Mr. Macklem and Senior Deputy Governor Carolyn Rogers will hold a press conference at 11 a.m. ET.

–Marc Rendell