The Bank of Canada may shift its focus from the output gap to labor market indicators, such as unemployment and wages, in order to make inflation forecasts and guide its interest rate decisions, according to a report by CIBC economists. The report suggests that the labor market has become a more reliable indicator of excess demand or supply, and forecasts that if the job market outlook suggests it's not necessary, there may be no more rate hikes this year and rate cuts in early 2024.
Canada is facing a deep crisis due to a housing crisis, rising consumer debt, and high interest rates, which are causing unaffordability and financial vulnerability for working people, while the government's plan to address these challenges remains unclear.
Canada added 40,000 jobs in August, surpassing economists' expectations, while the unemployment rate remained steady at 5.5%. This positive job growth suggests that the economy is not completely stalled, but the Bank of Canada is not expected to raise interest rates in the near future.
Canada's economic growth strategy is failing and needs to be reevaluated, as the country's GDP per capita growth is among the weakest in OECD countries and real incomes are lower than before the pandemic, with projections suggesting that it will not recover until at least 2027, according to policy advisers. The government's core policy beliefs, including freewheeling government spending, reliance on government programs to drive innovation, and excessive immigration, are misguided and contribute to a low-productivity, low-wage economy. A policy agenda focused on raising average living standards through fiscal and monetary policy restraint, productivity-focused measures, and tax and regulatory reforms is needed.
High inflation is leading to increased labor action in Canada as workers demand higher wages to combat the eroded purchasing power caused by rising costs of living, according to a report by RBC Economics. The report suggests that taming inflation is crucial to restoring peace in labor relations in the country.
Bank of Canada warns that firms raising prices more frequently and sharply may complicate efforts to bring inflation back to 2%, while former Bank of England governor Mark Carney expects the US Federal Reserve to raise interest rates again before year-end to help curb inflation; a former Bank of Canada official warns that current home prices in Canada cannot be justified if medium-term interest rates stay elevated, posing a risk to the country's housing sector; Canada and India experience strained bilateral ties over the Canadian suspicion of Indian government agents' involvement in the murder of a Sikh separatist leader; Ontario Premier Doug Ford's boundary changes in Ottawa and Hamilton are believed to benefit developers who own rural land and could increase their value; WeWork chooses to skip $95 million in interest payments as it attempts to jumpstart talks with lenders; discount airline Arajet plans to launch flights between the Dominican Republic and Toronto and Montreal this fall, entering the crowded field of low-cost carriers in Canada; Bank of Canada notes that Canadian businesses have been making larger and more frequent price changes since the pandemic, passing on higher costs to consumers, potentially stoking inflation; Elon Musk's X Corp, formerly known as Twitter, faces a trademark lawsuit from a legal-marketing company claiming that its new name infringes its trademark incorporating the letter "X"; Lundin Mining CEO Peter Rockandel will step down at the end of the year, with Jack Lundin taking his place as CEO and rejoining the board in 2024.
Prime Minister Justin Trudeau criticizes Alberta Premier Danielle Smith's plan to withdraw the province from the Canada Pension Plan, stating that it would weaken pensions and introduce uncertainty and instability.
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