North America

  • 2020-06-25 11:25

    By Pedro Nicolaci da Costa

    WASHINGTON (MNI) - The lowest paid workers have been hit hardest by the pandemic-led recession that rapidly pushed the U.S. unemployment rate into the double-digits, according to a new paper co-authored by Federal Reserve economists.

    That could mean the Fed will keep interest rates near zero for even longer than markets now expect as policymakers seek to ensure an eventual recovery reaches the most vulnerable corners of society, a concern Fed Chairman Jerome Powell has repeatedly emphasized.

    As of late May, employment for workers in the lowest 20% of the income distribution was still 30% lower relative to mid-February, said the paper, co-authored by four Fed staffers and presented at a Brookings Institution conference Thursday.

  • 2020-06-24 14:25

    --Finance Minister Morneau Reacts to Fitch Stripping AAA Rating

    OTTAWA (MNI) - Finance Minister Bill Morneau said Wednesday that Canada's fiscal picture remains stronger than many G20 peers despite losing its triple-A credit rating from Fitch due to record spending to shield the economy from Covid-19.

    "Going into the global pandemic, Canada was in a great position to deploy our fiscal firepower to protect Canadians, and we have," Morneau said in comments emailed by spokeswoman Maeva Proteau to MNI. "A worse case scenario for Canadians and the economy would have been to not act."

    "Global markets continue to invest in Canadian bonds driving our cost of borrowing to historic lows," Morneau said.

  • 2020-06-24 09:00

    By Greg Quinn

    WASHINGTON (MNI) - The IMF reduced its 2020 global GDP forecast to -4.9% from -3% and said every region will contract for the first time ever as the Covid-19 pandemic continues adding damage to the deepest slump since the Great Depression.

    Output next year will only recover to around 2019 levels or 6.5pp less than what the IMF expected at the start of this year, according to a report Wednesday. Consumption has fallen far more than in other recessions, investment has tumbled, and a "catastrophic hit to the global labor market" will hobble the recovery.

    "Downside risks, however, remain significant," the Washington-based fund said, including a second wave of the virus that could reduce GDP another 4.9pp next year.

  • 2020-06-23 16:39

    By Greg Quinn

    OTTAWA (MNI) - Canadian Finance Minister Bill Morneau said Tuesday the government may shift into more long-term debt to avoid the risk of a squeeze on short-term securities, a need that has arisen amid unprecedented spending to halt Covid-19.

    "One of the things that we are making sure we do as we manage the treasury function of the government is to ensure that we have the balance between the risk of rollover and the risk of the cost of longer debt," Morneau told a Senate hearing in Ottawa.

  • 2020-06-22 11:00

    --New Governor Sticks To Script In First Speech

    OTTAWA (MNI) - The Bank of Canada will continue to use asset purchase programs over negative rates if needed in future, continuing with policies like the purchase of at least CAD5 billion a week in federal bonds until the recovery is well underway, Governor Tiff Macklem said in his first public speech as governor, sticking largely to his predecessor's toolkit.

    The economy faces an inconsistent recovery from Covid-19, though growth will return in Q3, and the BOC's big job is avoiding a slide in prices, Macklem said Monday, noting some industries "won't reopen until we have a vaccine or at least very effective anti-viral medications."

    Macklem said the next policy meeting on July 15 will restore only part of the

  • 2020-06-19 14:56

    By Greg Quinn

    OTTAWA (MNI) - The Bank of Canada's balance sheet topped the half trillion dollar mark for the first time as federal bond purchases continued to rise faster than the minimum target of CAD5 billion a week.

    Assets grew to CAD509 billion as of June 17 from CAD498 billion a week earlier, figures the Ottawa-based bank posted Friday showed. Federal bonds climbed CAD7 billion to CAD152 billion, and t-bills by CAD2.6 billion to CAD118 billion.

    Holdings of repos stalled at CAD211 billion, and the third week of a program to buy up to CAD10 billion of corporate bonds amounted to just CAD94 million. Provincial bond and bill holdings were CAD11.7 billion.

  • 2020-06-19 09:11

    By Greg Quinn

    OTTAWA (MNI) - Canadian retail sales rose 19% in May according to a flash estimate, a partial rebound from a record 26% fall in April, reflecting Covid-19 shutdowns followed by the slow re-opening of some stores, data published by Stats Canada Friday showed.

    The April decline reported Friday was bigger than both the 15% expected by analysts and the agency's 16% flash estimate given a month ago.

    Other reports on wholesaling, manufacturing and inflation have also shown greater-than-expected weakness, suggesting downside risk to a consensus for GDP to fall as much as 40% annualized in the second quarter.

    Retail sales have fallen 34% since mid-March when social distancing rules were first imposed.

  • 2020-06-18 18:13

    --Declines On Repos And FX Swaps

    WASHINGTON (MNI) - The Fed's balance sheet shrank for the first time since late February as foreign exchange swaps and repo agreements rolled off, in a week where Jerome Powell moved to tweak corporate bond purchases and make Main Street loans more effective.

    The portfolio shrank USD74 billion to USD7.09 trillion, driven by a USD92 billion decline in FX swaps and a USD88 billion decline in repos. The balance sheet was still up 67% from USD4.24 trillion in early March.

    Policy makers say declining use of some emergency financing brought in when Covid-19 froze up markets is a sign the programs are helping return trading to normal.

  • 2020-06-18 13:32

    By Greg Quinn

    OTTAWA (MNI) - Bank of Canada Deputy Governor Larry Schembri said Thursday consumer spending will likely remain subdued until a Covid-19 vaccine is widely available, and policy makers are watching for rising insolvencies as relief checks and mortgage deferrals wind down.

    About 700,000 households have tapped into a program to defer mortgage payments for up to six months, and the government's CAD2,000 a month relief checks will likely wind down after a recent eight-week extension.

  • 2020-06-18 13:27

    By Pedro Nicolaci da Costa

    WASHINGTON (MNI) - The Federal Reserve's Community Advisory Council in recent meetings called on the central bank to make significant changes to its emergency credit programs aimed at small businesses and municipalities in order to reach some of the hardest-hit communities in the Covid-19 pandemic.

    The group cited estimates that "the loss (permanent closure) of small businesses will be somewhere between 25 percent to 30 percent or even greater" nationwide, with huge implications for the country's employment and recovery prospects.

    As markets remain on edge about a possible second wave of infections, the Fed released records of two meetings held by its Community Advisory Council, one in April and the other in May.