Tausi Insider

Used vehicles for sale are seen at an auto mall in Ottawa, on April 26, 2021. Justin Tang/The Canadian Press In mid-2021, when “transitory” was the go-to word for central bankers trying to ease concerns about inflation, U.S. Federal Reserve chairman Jerome Powell highlighted surging used-car and truck prices, which were up 45 per cent from the year before and accounted for one-third of the jump in core inflation. Citing a “perfect storm” of strong demand and supply disruptions, he urged calm: “They should stop going up and at some point should actually go down.” “Transitory” was eventually dropped from central-bank speeches as inflation proved to be more entrenched, but on the used-vehicle front, Mr. Powell eventually turned out to be right. In October, used-car and truck prices saw their fourth straight monthly decline, which economists took as a sign that overall inflation has turned a corner. Even though price tags on used vehicles are still well above where they were in 2019, the...

Parliamentary Budget Officer Yves Giroux's office decided to crunch the numbers to estimate what would happen if the Bank of Canada overstepped with its rate increases. Dave Chan/Tausi Insider After six interest rate increases totalling 3.5 percentage points – and with the promise of still more to come – there’s a growing urgency to the questions the Bank of Canada faces about its aggressive pursuit to snuff out inflation. How high is the central bank willing to go? How far is too far? And how much economic collateral damage might the bank inflict if its policy tips into overzealousness? With the question becoming an increasing preoccupation of Ottawa policy makers and a broad swath of the Canadian public, the Office of the Parliamentary Budget Officer decided to crunch the numbers to estimate what would happen if the Bank of Canada overstepped with its rate increases. Predictably, it’s not good. Arguably, it might be tolerable. But surprisingly, it might not make much difference...

The U.S. Federal Reserve may consider slowing the pace of rate increases at its next meeting but that should not be seen as a “softening” in its commitment to lower inflation, Federal Reserve Gov. Christopher Waller said on Sunday. Markets should now pay attention to the “endpoint” of rate increases, not the pace of each move, and that endpoint is likely still “a ways off,” Waller said in response to a series of questions on monetary policy at an economic conference organized by UBS in Australia. “It depends on inflation.” “We’re at a point we can start thinking maybe of going to a slower pace,” Waller said, but “we’re not softening...Quit paying attention to the pace and start paying attention to where the endpoint is going to be. Until we get inflation down, that endpoint is still a ways out there.” A report released last week showing slower than expected inflation in October was “good news,” but was “just one data point” that would have to be followed with other similar readings t...

Oil prices dropped to trade near two-month lows on Monday, having earlier slid by around $1 a barrel, as supply fears receded while concerns over fuel demand from China and U.S. dollar strength weighed on prices. Brent crude futures for January had slipped 65 cents, or 0.7 per cent, to $86.97 a barrel by 1000 GMT. U.S. West Texas Intermediate (WTI) crude futures for December were at $79.71 a barrel, down 37 cents or 0.5 per cent, ahead of the contract’s expiry later on Monday. The more active January contract was down 50 cents or 0.6 per cent to $79.61 a barrel. Both benchmarks closed Friday at their lowest since Sept. 27, extending losses for a second week, with Brent down 9 per cent and WTI 10 per cent lower. “Apart from the weakened demand outlook due to China’s COVID curbs, a rebound in the U.S. dollar today is also a bearish factor for oil prices,” said CMC Markets analyst Tina Teng. “Risk sentiment becomes fragile as all the recent major countries’ economic data point to a rece...

Christine Lagarde, President of the European Central Bank listens during a news conference in Frankfurt, Germany, on July 21. Michael Probst/The Associated Press The head of the European Central Bank said Monday she does not believe inflation has peaked after reaching the highest levels on record. ECB President Christine Lagarde also told European lawmakers that the bank isn’t through raising interest rates to combat those price spikes. There is too much uncertainty to know whether inflation, which hit 10.6% in October, would come down soon in the 19 countries that use the euro currency, Lagarde said. When looking at what is driving inflation, “whether it is food and commodities at large, or whether it is energy, we do not see the components or the direction that would lead me to believe that we have reached peak inflation and that it is going to decline in short order,” she said. That means the central bank will “continue to tame inflation with all the tools that we have,” primarily...

Oil prices were stable on Friday but both benchmarks were headed for a weekly loss on worries over weak economic outlooks in China, Europe and the United States weighing on oil demand. Brent crude futures were at $76.16 a barrel, up 1 cent, at 0919 GMT. Brent hit a 2022 low this week. U.S. West Texas Intermediate crude inched up 7 cents to $71.53 a barrel. The contracts are set for weekly losses of around 10% each, their worst weekly drops in percentage terms since August and April, respectively. The market structure for Brent contracts has switched to contango, meaning contracts for near-term delivery are cheaper than for delivery in six months, indicating that traders see weaker demand. News of a leak closing Canadian firm TC Energy’s Keystone pipeline in the United States prompted a brief rally on Thursday. However, prices finally eased as the market took a view that the closure would be brief. The market similarly shrugged off a queue of oil tankers being held up by Turkish autho...

Oil prices rose in early Asian trade on Friday after falling 2% in the previous session on central bank interest rates hikes, and is poised to end the week higher after a series of positive oil demand forecasts. Brent crude futures rose 36 cents or 0.4% to $81.57 per barrel by 0109 GMT. West Texas Intermediate futures rose 25 cents, or 0.3%, to $76.36 per barrel. Both benchmarks are poised to end the week more than 7% higher. The market found support this week from International Energy Agency projections of Chinese oil demand recovering next year after a 2022 contraction to 400,000 barrels per day (bpd). The agency raised its 2023 oil demand growth estimate to 1.7 million bpd. OPEC on Tuesday stuck to its forecasts for global oil demand growth of 2.55 million bpd this year and 2.25 million bpd in 2023 after several downgrades, saying that while economic slowdown was “quite evident” there was potential upside such as from a relaxation of China’s zero-COVID policy. In bearish demand ne...

It is time to increase the Canada Deposit Insurance Corp.’s insurance limits to strengthen this country’s banking system. Andrew Moor is the president and chief executive officer of EQ Bank, and Michael Mignardi is general counsel. Deposit insurance provided by the Canada Deposit Insurance Corp. is an important contributor to the stability of Canada’s banking system. If a participating financial institution goes under, CDIC ensures that people’s savings are insured up to a certain amount and remain accessible. That’s why it is concerning that nearly 20 years have passed since the last time a federal budget (2005) increased coverage for Canadians to $100,000 per insurable category, up from $60,000 with the cost borne by participating financial institutions. While $100,000 may sound sufficient, it is far lower than other developed countries, and that figure has been eroded by inflation, which reduces purchasing power and the value of money – making a limit of $100,000 even lower in rea...

The Bank of Canada's recently released third-quarter financial results showed that for the first time, the bank incurred a net loss of $511-million. Sean Kilpatrick/The Canadian Press Sonja Chen and Trevor Tombe are professors of economics at the University of Calgary. While the full effects of the Bank of Canada’s rate hikes are not yet known, there is an immediate effect on the central bank’s own finances: growing interest expenses and large financial losses. The bank’s recently released third-quarter financial results showed that for the first time, the bank incurred a net loss: $511-million. This is only the beginning. This matters, especially at a time of heightened political attention toward monetary-policy issues. The bank’s revenue is largely derived from its asset holdings, which mainly included Government of Canada bonds and treasury bills. Prior to the COVID-19 pandemic, these bond holdings cost the bank very little, and their returns normally exceeded bank expenses b...

JPMorgan's corporate headquarters, in New York, on May 20, 2015. Mike Segar/Reuters JPMorgan Chase & Co JPM-N said on Friday it set aside $1.4-billion in anticipation of a mild recession, even as it reported a better-than-expected quarterly profit on the back of strong performance at its trading unit. Shares of the biggest U.S. bank fell about 3 per cent in premarket trading as it kicked off quarterly earnings for corporate America that are expected to fall for the first time since the third quarter of 2020. While Chief Executive Jamie Dimon said consumers were still spending excess cash and businesses remained healthy, he listed a number of uncertainties facing the economy. “We still do not know the ultimate effect of the headwinds coming from geopolitical tensions including the war in Ukraine, the vulnerable state of energy and food supplies, persistent inflation... and the unprecedented quantitative tightening.” The bank flagged a modest deterioration in its macroeconomic ...

Wells Fargo & Co WFC-N on Friday reported a 50 per cent decline in profit for the fourth quarter, missing analysts’ estimates, as the bank racked up more than $3-billion in costs related to a fake accounts scandal and boosted loan loss reserves for a potential economic slowdown. The bank’s shares were down nearly 4 per cent in premarket trade. The fourth-largest U.S. lender reported a profit of 67 cents per share for the quarter ended Dec. 31, compared with $1.38 per share a year earlier. On an adjusted basis, the bank earned 61 cents per share, compared with analysts’ estimates of 66 cents per share, according to Refinitiv IBES data. Provision for credit losses was $957-million in the quarter, compared with a $452-million release a year earlier. Provision for credit losses in the quarter included a $397-million increase in the allowance for credit losses primarily reflecting loan growth, as well as a less favorable economic environment, the bank said. Though Wells Fargo’s operat...

Citigroup Inc C-N reported a 21 per cent fall in quarterly profit on Friday, missing forecasts, as the bank increased provisions to prepare for a worsening economy and investment banking revenue declined due to a sharp drop in deal making activity. Fears of a potential recession prompted Citi to add $640-million to its reserves in the fourth quarter, compared with a release of $1.37-billion from its reserves in 2021 when pandemic-related loan losses failed to materialize. “We continue to see the U.S. entering into a mild recession in the second part of the year,” Chief Executive Officer Jane Fraser said in a call with analysts. The bank sees consumer and corporate balance sheets remaining strong, and “very sticky” core inflation. On an adjusted basis, Citi earned $1.10 per share for the fourth quarter ended Dec. 31, below estimates of $1.14 a share, according to Refinitiv. The U.S. Federal Reserve last year raised its interest rate by 425 basis points from the near-zero level to tame...

Bank of America Corp BAC-N reported a bigger-than-expected fourth-quarter profit on Friday, helped by a surge in net interest income as the U.S. Federal Reserve raised rates through most of last year. The ‘higher-for-longer’ rate environment to battle decades-high inflation has underpinned profits at consumer banks, with analysts expecting those gains to peak in 2023 and help offset sluggish deal making as well as bigger loan loss provisions. Bank of America’s net interest income (NII), which reflects how much money the bank makes from charging interest to customers, jumped 29 per cent to $14.7-billion in the quarter. Its profit applicable to common shareholders rose 2 per cent to $6.9-billion, or 85 cents per share. Analysts, on average, had estimated a profit of 77 cents per share, according to Refinitiv IBES data. Though four-decade-high inflation rates are testing U.S. consumers, spending trends have still largely been positive, bolstering Bank of America’s profit in its key cons...

European Central Bank president Christine Lagarde speaks during the 53rd annual meeting of the World Economic Forum, in Davos, Switzerland, on Jan. 19. LAURENT GILLIERON/The Associated Press The European Central Bank pushed back on Thursday against market bets that it would slow the pace of its interest rate hikes given recent falls in inflation and easing pressure to keep up with policy moves by other central banks. Traders had recently trimmed their expectations for how much the ECB would raise borrowing costs, comforted by data showing lower inflation in both the euro zone and the United States and related talk of smaller hikes by the U.S. Federal Reserve. But ECB President Christine Lagarde and fellow policy maker Klaas Knot said investors were underestimating the ECB’s determination to bring inflation in the 20-nation euro zone back to its 2 per cent target, from 9.2 per cent last month. “I would invite them to revise their positions,” Lagarde said during a panel conversation in...

Oil prices rose in early Asian trade on Friday after falling 2% in the previous session on central bank interest rates hikes, and is poised to end the week higher after a series of positive oil demand forecasts. Brent crude futures rose 36 cents or 0.4% to $81.57 per barrel by 0109 GMT. West Texas Intermediate futures rose 25 cents, or 0.3%, to $76.36 per barrel. Both benchmarks are poised to end the week more than 7% higher. The market found support this week from International Energy Agency projections of Chinese oil demand recovering next year after a 2022 contraction to 400,000 barrels per day (bpd). The agency raised its 2023 oil demand growth estimate to 1.7 million bpd. OPEC on Tuesday stuck to its forecasts for global oil demand growth of 2.55 million bpd this year and 2.25 million bpd in 2023 after several downgrades, saying that while economic slowdown was “quite evident” there was potential upside such as from a relaxation of China’s zero-COVID policy. In bearish demand ne...