Bank of Canada Governor Tiff Macklem takes part in a news conference, after cutting key interest rate for the first time in four years.Blair Gable/Reuters
Getting caught up on a week that got away? Here’s your weekly digest of the Globe’s most essential business and investing stories, with insights and analysis from the pros, stock tips, portfolio strategies and more.
Bank of Canada cuts key interest rate to 4.75%
The Bank of Canada finally pulled the trigger and lowered its policy rate to 4.75 per cent on Wednesday – the first rate cut in four years. The highly anticipated move marks a turning point for the Canadian economy after the biggest inflation and interest-rate shock in decades. Governor Tiff Macklem remained tight-lipped about how fast interest rates will fall, but suggested that cuts would likely be “gradual,” Mark Rendell reports. Still, the first rate cut in years offers some relief to Canadian borrowers – even if that’s not felt in their pocketbooks just yet. It could also breathe life back into the Canadian real estate market. The Bank of Canada is the first G7 central bank to start easing monetary policy. The European Central Bank followed suit on Thursday with its own quarter-point rate cut.
Builders are just metres away from connecting Windsor’s Gordie Howe bridge
Builders are just metres away from connecting the Gordie Howe International Bridge – the largest bridge ever built between Canada and the United States. When that feat is accomplished, the bridge will form a continuous span over the majestic waterway that flows between Detroit and Windsor, Ont. The bridge is still more than a year away from opening, but the imminent union of its two halves signals a new reality. Ivan Semeniuk reports on the historic expansion at North America’s busiest border crossing, speaking to engineers and stakeholders about its “cable-stayed” design, the years-long process and the challenges ahead.
Labour costs, weak productivity could spoil the next leg of the rate-cut journey
How far and how fast will the Bank of Canada cut interest rates? That answer could lay heavily on two critical economic measures – productivity and labour costs. New data suggest labour costs are rising, while productivity is weakening. According to Statistics Canada, labour productivity in Canada declined 0.3 per cent in this year’s first quarter from the quarter before. But unit labour costs, or how much businesses pay workers in wages and benefits to produce one unit of output, jumped 1.3 per cent over the same period. So, what exactly does that mean for inflation and interest rates? Jason Kirby takes a closer look at the figures in this week’s Decoder.
TD bank employee accused of helping clients skirt controls in new U.S. money-laundering case
Toronto-Dominion Bank is facing more anti-money laundering troubles from regulators in the United States. In the latest case, a branch employee in Florida is accused of accepting bribes to help move millions of dollars to Colombia. The employee accepted bribes to create bank accounts, provide debit cards, and grant online access for individuals to transfer money, largely through the use of automated teller machines (ATMs), according to court documents. The second-largest lender in Canada has found itself embroiled in lengthy U.S. probes into weaknesses in its anti-money laundering practices. The investigations are expected to result in large financial penalties, which analysts estimate could hit US$2-billion, Stefanie Marotta reports.
Troubled condo project The One looking for $1.2-billion sale
The saga of The One, a troubled condo project in Toronto co-owned by real-estate developer Sam Mizrahi and road paving magnate Jenny Coco, took another turn this week. The receiver is seeking to sell the unfinished skyscraper, but says creditors won’t accept anything less than $1.2-billion. The project’s lenders are owed $1.5-billion after the co-owners defaulted on loan payments during construction. The One was placed under a court-ordered receivership last October after one of the lenders refused to provide more funding unless an outside group was appointed to manage the project. The sale is likely to be difficult given the history of the building, today’s high borrowing costs and a slowdown in the condo market, Rachelle Younglai and Tim Kiladze report.
The absence of inflation indexing is making us poorer
Inflation is simmering down and a tough chapter in Canada’s economy may be nearing an end, but Canadians are still feeling the economic effects. Price levels are permanently higher and many households have suffered a financial hit that could persist for years – even decades. The culprit lies in “Canada’s piecemeal approach to inflation indexing,” Matt Lundy and Erica Alini report, which refers to the process of adjusting wages, benefits or other values to keep pace with inflation. Many aspects of people’s financial lives – tax credits, social assistance and health benefits – are not adjusted to retain their dollar value. For some, the financial hit is relatively small. For others, it’s massive.
Take our business quiz for the week of June 7
b. The Canadian government. It is being paid for entirely by the Canadian government. The project will effectively double the region’s cross-border traffic capacity and make it easier for manufacturers to ship products back and forth across the border.
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