I can tell you now that my attempt at getting the news ahead of Tiff Macklem’s announcement by flying a drone over his office didn’t pan out. But now that we know he did, in fact, lower the Bank of Canada’s benchmark lending rate for the second-consecutive time, we can review its implications accordingly.
Up top
- A scoop to start: Canada’s largest grocer, Loblaw Cos. Ltd., and its parent company George Weston Ltd., have agreed to pay $500-million to settle several class-action lawsuits over their role in an alleged scheme to fix bread prices in Canada from 2001 to 2015, Susan Krashinsky Robertson reports. The settlements come as the company faces public pressure over grocery prices.
- Hold, please: Rogers Communications Inc.’s second-quarter profit reflected a boost from lower costs related to its $20-billion acquisition of Shaw Communications. But Jameson Berkow reports that revenue from the company’s cable business fell about 2 per cent from a year earlier, and it’s facing elevated competition for wireless customers.
- Copper cut: Teck Resources Ltd. is cutting its copper production forecast and hiking its costs just weeks after the Canadian miner’s focus narrowed significantly to rely only on metals. Teck’s copper issues stem mainly from “geotechnical and pit dewatering” challenges in ramping up a major mine in Chile, Niall McGee writes.
- No recuses: The federal ethics commissioner has ruled that the former chair of Sustainable Development Technology Canada contravened conflict-of-interest rules when she failed to recuse herself from funding decisions for companies she has ties to – including one that she leads as chief executive, Jeffrey Jones reports.
In focus
A second cut. Now what?
Bank of Canada Governor Tiff Macklem brings the lending rate lower.Justin Tang/The Canadian Press
Another one: The central bank lowered its benchmark interest rate for the second consecutive time and said it’s now putting more emphasis on downside risks to economic growth, rather than focusing mainly on the risk of a rebound in inflation, Mark Rendell reports.
This is the second cut in a long-awaited monetary policy easing cycle, and comes after the bank raised interest rates 10 times in 2022 and 2023 to tackle the most serious bout of inflation in a generation. The move brings the bank’s policy rate to 4.5 per cent from 4.75 per cent.
What it means
The good: Price pressures have eased over the past two years, as global supply chains have improved.
The bad: Economic growth has stalled and restrictive interest rates have curbed consumer spending. The cut will bring relief to borrowers, but that’s only in the context of rising unemployment and a weakening labour market.
The ugly: Pressures are persistent and prevalent: Rent and mortgage interest costs are weighing on many Canadians.
- And the price increases of bread and other items in Statistics Canada’s “basket of goods” have accelerated for two consecutive months, climbing at an annual pace of 2.1 per cent in June after rising 1.5 per cent in May.
The bank also warned that geopolitical turmoil, trade disruptions and political risks, such as new tariffs, could put upward pressure on inflation.
Birdwatching
If analysts agreed on one thing yesterday, it was what kind of bird best represents the central bank’s vibes. From my inbox:
- “Unambiguously dovish”
- “This is clearly now a dovish central bank”
- “Dovish language”
- “Truly dovish remarks”
- “The tone of the statement is notably more dovish”
Not that we aren’t accustomed to reading about doves and hawks in economic coverage. But yesterday’s unusually large flock got us wondering how and when “hawkish” and “dovish” entered the macro vernacular – and why we don’t use, say, “barracudan” or “jellyfishy” to describe an aggressive monetary posture versus those who are comfy with lower interest rates.
One website helpfully explained that the terms hawkish and dovish “originated from the world of bird-watching,” while other sources observed that hawks are aggressive and sharp-eyed and doves represent peace. You don’t say!
We are fairly certain “hawkish” is a carryover from “war hawk” in the sixties. That makes sense, we suppose: A word just clicks and spreads around the world before you can say coo. But I’m not going to stop trying to make jellyfishy a thing. E-mail me with your suggestions and/or history lessons: cwilsonsmith@globeandmail.com.
Weighing in
Don’t hate: Rob Carrick says the latest interest-rate cut means the rehabilitation of variable-rate mortgages has begun.
Don’t wait: Why the Bank of Canada should ignore upside inflationary risks and carry on cutting as inflation gradually subsides.
Before the States: The bank is justified in cutting rates with the U.S. Federal Reserve dragging its heels, David Rosenberg writes.
What’s next
- The Bank of Canada’s next interest-rate announcement is on Sept. 4.
- The U.S. Federal Reserve’s Open Market Committee will meet on July 30 and 31. The Fed rate decision will be announced at the end of the FOMC meeting.
- Statistics Canada will release May GDP numbers on July 31. The next Labour Force Survey numbers will be published on Aug. 9, and the July inflation numbers will be out on Aug. 20.
Charted
Big Tech had a bad day, but save your sobs for spuds. Lamb Weston lost 28.2 per cent for the worst loss in the S&P 500 yesterday after the supplier of French fries and other frozen potato products reported weaker than expected profit. The company said it saw fewer diners in its restaurants than it had hoped, and warned challenges could continue into its coming fiscal year because of softer demand tied to “menu-price inflation.”
The lookout
On our radar and reading list
Zoom in: Earnings include Loblaw, Bombardier, Canfor, Cenovus Energy, AstraZeneca, Unilever, and Northrop Grumman.
Zoom out: Canada payroll survey and job vacancy rate for May. In the U.S., initial jobless claims, real GDP for the second quarter, and durable goods orders for June.
On a wing: Plane wings are designed to bend way more than I thought!
And a prayer: Economist Paul Seabright writes about the defrocking of an AI priest called Father Justin. The Divine Economy, Seabright’s new book, looks at the business of religion.
Morning markets
Global stocks tumbled in a tech tailspin after the worst day for the Nasdaq since 2022 as investor confidence was undermined by disappointing earnings from heavyweights Alphabet and Tesla. North American futures were muted.
Overseas, the pan-European STOXX 600 was down 1.49 per cent in morning trading. Britain’s FTSE 100 slid 0.55 per cent, Germany’s DAX gave back 1.36 per cent and France’s CAC 40 retreated 2.04 per cent.
In Asia, Japan’s Nikkei closed 3.28 per cent lower, while Hong Kong’s Hang Seng fell 1.77 per cent.
The Canadian dollar traded at 72.27 U.S. cents.