Briefing highlights
- Fed to stand pat, ignore Trump
- Stocks, loonie, oil at a glance
- Loblaw raises dividend, profit slips
- What to watch for today
- Required Reading
Fed to stand pat
A patient Federal Reserve will ignore an impatient Donald Trump today, holding interest rates steady in the face of the U.S. president’s call for hefty cuts.
Mr. Trump called Tuesday for the U.S. central bank to cut its benchmark rate by a percentage point and add even more stimulus via other measures. The U.S. economy would shoot up “like a rocket” if the Fed cut rates by, say, one point alongside “some quantitative easing,” the president tweeted.
Mr. Trump has taken repeated shots at the Fed, calling for chair Jerome Powell and his colleagues to help juice the economy, something a president traditionally does not do to an independent central bank.
Of course, Mr. Trump is not a traditional president.
Regardless, Mr. Powell and other members of the federal open market committee, the central bank’s policy-setting group, won’t cut rates after their meeting today.
Federal Reserve chair Jerome PowellSusan Walsh/The Associated Press
While markets expect no change, they will be closely watching the Fed’s language and what Mr. Powell has to say at a post-decision news conference. Investors are looking for signs of the Fed’s timeline since it adopted its patient approach and halted its rate-hiking cycle.
Some believe the central bank may yet cut rates, though others don’t see that in the cards.
Mr. Trump urged the rate cut even as the U.S. economy shows some resilience, with the economy expanding at an annual pace of 3.2 per cent in the first quarter.
“The president’s rationale for this call appears to be an inflation level that has fallen below the Fed’s target rate of 2 per cent,” said CMC Markets chief analyst Michael Hewson.
“This presents a problem for Fed chair Jerome Powell as he tries to navigate an economy that continues to give mixed signals as to its overall health but still remains the best house in the neighbourhood when it comes to the underlying economic numbers,” he added.
“Quite simply, the data do not warrant a reduction in interest rates, however the continued resilience of the U.S. dollar could present a problem if it continues to rise at its current rate.”
Royal Bank of Canada’s Elsa Lignos also expects the Fed to stand pat and signal its “on-hold bias,” while citing some better recent indicators.
“We look for chair Powell to affirm this narrative in his press conference while stopping short of announcing the ‘all-clear,’” said Ms. Lignos, RBC’s global head of foreign exchange strategy in London.
“In other words, while Powell will likely acknowledge the better data and easing financial conditions, it is unlikely that he will begin to build a case for shifting the Fed bias back to tightening,” she added.
“The stand-pat stance on rates should still dominate. Similarly, Powell is likely to be unconvinced of the need for the committee to cut rates any time soon.”
Read more
- Trump says Fed could send U.S. economy ‘up like a rocket’ with quantitative easing
- David Parkinson: U.S. GDP report could be papering over some widening cracks
- U.S. economy grows 3.2 per cent in first quarter, but contributing factors believed to be temporary
Markets at a glance
Read more
CPPIB backs investor group
Canada’s top pension manager is backing the idea of dissolving Bombardier Inc.’s dual class share structure, forcing the company onto the defensive as it hosts investors for its annual meeting Thursday, The Globe and Mail’s Nicolas Van Praet reports.
Canada Pension Plan Investment Board, one of Bombardier’s 20 biggest shareholders, says on its website it will vote in favour of a proposal by investor rights group Médac to end the two class system.
Read more
Ottawa boosts canola aid
The Canadian government has unveiled a financial aid package for canola growers hit by Chinese restrictions on Canada’s biggest crop, Eric Atkins reports.
Agriculture Minister Marie-Claude Bibeau said Ottawa is more than doubling the amount of money all farmers can borrow under a government-backed financing program to $1-million from $400,000 as grain traders look for new markets to replace Canada’s biggest buyer of the oilseed.
For canola growers, the measures include an increase to the interest-free portion of the cash advances to $500,000 from $100,000, and the promise of government efforts to find new global markets for Canada’s most valuable crop.
Read more
Ticker
Loblaw raises dividend
From The Canadian Press: Loblaw Cos. Ltd. raised its quarterly dividend to 31.5 cents, up from 29.5 cents, as it posted a lower first-quarter profit. Profit attributable to common shareholders slipped to $198-million, or 53 cents a share, from $377-million or 98 cents a year earlier. Revenue rose to $10.7-billion.
U.S. cites ‘productive’ talks
From Reuters: China and the United States held “productive” trade talks in Beijing on Wednesday and will continue discussions in Washington next week, U.S. Treasury Secretary Steven Mnuchin said, as the two try to end their trade war.
What to watch for today
Bank of Canada governor Stephen Poloz and senior deputy governor Carolyn Wilkins have a second day of testimony today, this time to the Senate banking committee.
Also on tap are earnings reports from some notable companies, including Calfrac Well Services Ltd., Cameco Corp., Canfor Corp., Domtar Corp., Fortis Inc., Gildan Activewear Inc., Loblaw Cos., Manulife Financial Corp., Martinrea International Inc., Suncor Energy Inc. and Western Forest Products.
Required Reading
Ottawa to exempt some oil sands projects
The federal government will exempt non-mining oil sands projects from impact-assessment reviews as long as Alberta’s new, United Conservative Party government maintains the province’s legislated cap on greenhouse gas emissions from the oil sands, a source says. Shawn McCarthy and Justin Giovannetti report.
Transat talks spark Quebec fears
Montreal-based Transat A.T. Inc. is evaluating unsolicited takeover offers, raising fears in Quebec that the province could lose another corporate head office. Tim Kiladze and Nicolas Van Praet report.
Pay mortgage or invest?
Personal finance columnist Rob Carrick looks at whether you should pay off your mortgage or invest your money.
Zuckerberg outlines transformation
Facebook Inc. chief executive Mark Zuckerberg has laid out a vision for transforming the world’s largest social-media network into a platform centred on private messaging, U.S. correspondent Tamsin McMahon writes.