Bank of Canada holds interest rate, underlines ‘growing’ trade uncertainty

By Andy Blatchford

THE CANADIAN PRESS

OTTAWA _ A cautious Bank of Canada kept its key interest rate on hold Wednesday as it bought itself more time to monitor mounting trade-related uncertainties out of the United States.

In sticking with its 1.25 per cent overnight target, the central bank blamed recent trade policy changes for the thickening clouds around the economic outlook.

Last week, U.S. President Donald Trump threatened to impose heavy tariffs on Canadian steel and aluminum. The announcement added to an already murky context for Canada that includes concerns over NAFTA’s renegotiation and fears over competitiveness, following corporate tax cuts south of the border.

The prospect of tariffs has created deep concerns in Canada, the No. 1 supplier of both steel and aluminum to the U.S. Ottawa has hinted at retaliatory action, as have the European Union and Mexico, in what could become an all-out trade war.

Trump has said that Canada and Mexico might be spared from his plans for a 25 per cent tariff on steel imports and 10 per cent tariff on aluminum imports if they agree to better terms for the U.S. in talks aimed at revising the North American Free Trade Agreement.

The Bank of Canada noted the widening unease around protectionism, without explicitly mentioning the tariff threat.

“Trade policy developments are an important and growing source of uncertainty for the global and Canadian outlooks,” the bank said in a statement Wednesday that accompanied its latest rate decision.

Many experts now believe the central bank will likely wait until the second half of the year before raising the rate again. Some say the next hike might not come until 2019 and at least one economist said Wednesday that, depending how things evolve, the bank could even lower the rate this year.

“If the worst-case scenario of some kind of trade war goes ahead, well, the chances of a rate cut this year are real,” Sebastien Lavoie, chief economist of Laurentian Bank Securities, said in an interview.

‘It seems to us that it’s very unlikely the Bank of Canada will be able to raise rates in the first half of this year. If it happens, it will have to be in the second half of this year and that may not even happen.”

Josh Nye, an economist with RBC Economics Research, said it’s unlikely metals tariffs on their own would drastically change the central bank’s thinking about whether it stays on a rate-hiking path.

“But if tit-for-tat measures escalate into a full-blown trade war _ and to be clear, we aren’t nearly there yet _ the (Bank of Canada) would have to rethink their tightening bias,” Nye wrote in note to clients.

Experts said the Bank of Canada’s statement also raises other arguments to help support a wait-and-see approach with the interest rate.

The statement pointed to weaker-than-expected growth in the fourth quarter, largely due to higher imports, and said that while wage growth had improved, it still remained below where many expect it should be in an economy with no labour-market slack.

The bank also stressed the need for more time to assess the impacts of new housing-market policies, including recent changes to mortgage rules. It said a surge of strong numbers in late 2017 was followed by softer figures early this year, suggesting “some pulling forward of demand ahead of new mortgage guidelines and other policy measures.”

Growth in household borrowing has also slowed for three-straight months, the statement said.

The bank also noted some encouraging economic developments.

It said global growth continued to be solid and broad-based, the economy was running close to its potential and stronger business investment suggested economic capacity could grow even further without lifting the inflation rate. Looking at the U.S., the bank predicted fresh government spending and tax reductions to increase growth in 2018 and 2019.

The bank also reiterated that more interest rate hikes will likely be necessary over time, but that the governing council will remain cautious when considering future decisions. The council will continue to be guided by incoming data, such as the economy’s sensitivity to higher rates, the evolution of economic capacity and changes to wage growth and inflation, it said.

Ahead of the announcement, governor Stephen Poloz was widely expected to hold off moving the rate because of weaker economic numbers in recent weeks and the expanding trade uncertainty.

Statistics Canada released figures earlier Wednesday suggesting the country’s merchandise trade deficit narrowed in January, though economists noted it was driven by a plunge in imports.

The deficit was $1.9 billion compared with a deficit of $3.1 billion in December. Imports totalled $47.7 billion, down 4.3 per cent from a record level in December, while exports fell 2.1 per cent in January to $45.8 billion.

Poloz has introduced three rate hikes since last summer, including an increase in January. The moves came in response to an impressive economic run for Canada that began in late 2016.

The central bank’s next rate announcement is scheduled for April 18, when it will also publish its updated economic projections. The bank said the impacts on inflation and growth from commitments in last month’s federal budget would be incorporated into its April projections.

Manulife posts $1.6 billion fourth quarter net loss on $2.8 billion in charges

TORONTO _ Manulife Financial Corp. says a $2.8-billion post-tax charge related to U.S. tax reform and a decision to change its portfolio asset mix resulted in a $1.6 billion or 83 cents per diluted share net loss in the fourth quarter of 2017.

The company earned a net profit of $63 million or a penny per share in the year-earlier period, in which it declared a $1.2-billion charge related to the direct impact of markets.

Manulife CEO Roy Gori says the tax change that hit net income in the most recent quarter will benefit the company in the future, adding Manulife is “fully committed” to transforming its business to become a digital leader with stronger customer focus.

The financial services and insurance company says its quarterly dividend is being increased by seven per cent to 22 cents per common share from 20.5 cents.

It says earnings before special charges in the fourth quarter were $1.20 billion or 59 cents per share, down six per cent from $1.29 billion or 63 cents per share in the same period of 2016, due to lower investment gains, offset by strong growth in Asia business.

For the year, Manulife says it had net earnings of $2.1 billion or 98 cents per share, compared with $2.9 billion or $1.41 per share in 2016.

It says its core earnings before charges for 2017 were $4.56 billion or $2.22 per share, up from $4.02 billion or $1.96 per share in 2016.

iA Financial Group adds travel insurance to its individual insurance offer

In collaboration with established partner, TuGo

QUEBEC CITY, Jan. 17, 2018 /CNW Telbec/ – iA Financial Group is proud to partner with TuGo, one of the largest providers of travel insurance in the country, to offer travel insurance and provide its clients with TuGo’s recognized quality customer service and expertise. TuGo has more than 50 years of experience assisting travellers across the globe.

Distinguishing features of this insurance:

  • Simplified eligibility criteria
  • Reliable emergency assistance anywhere in the world, 24/7
  • Multilingual customer service
  • myTuGo online client portal

“Travel insurance meets the needs of most people who are concerned with being properly protected when they travel, states Pierre Vincent, Senior Vice-President, Individual Insurance and Sales at iA Financial Group. We are proud to extend our product offer through our partnership with TuGo, a company that is recognized for the quality of the service it provides.”

iA Financial Group’s new travel insurance product is exclusively digital and can be obtained from an advisor or directly at ia.ca. There are no medical eligibility questions for travellers under 60; travellers 60 or older are only required to answer five simple questions.

About iA Financial Group
Founded in 1892, iA Financial Group is one of the largest insurance and wealth management companies in Canada. It also operates in the United States. iA Financial Group stock is listed on the Toronto Stock Exchange under the ticker symbol IAG.

iA Financial Group is a business name and trademark of Industrial Alliance Insurance and Financial Services Inc.

SOURCE Industrial Alliance Insurance and Financial Services Inc.

Bank of Canada hikes interest rate to 1.25%, cites strong economic data

By Andy Blatchford

THE CANADIAN PRESS

OTTAWA _ The economy’s impressive run prompted the Bank of Canada to raise its trend-setting interest rate Wednesday for the third time since last summer but looking ahead it warned of growing uncertainties about NAFTA.

The central bank pointed to unexpectedly solid economic numbers as key drivers behind its decision to hike the rate to 1.25 per cent, up from one per cent. The increase followed hikes in July and September.

While the central bank signalled more rate increases are likely over time, it noted the unknowns surrounding the future of the North American Free Trade Agreement and the potential negatives for Canada were casting a widening shadow over its outlook.

The bank said ‘some continued monetary policy accommodation will likely be needed” to keep the economy operating close to its full potential.

Governing council, it added, would remain cautious when considering future hikes by assessing incoming data such as the economy’s sensitivity to the higher borrowing rates.

For the move Wednesday, the bank couldn’t ignore the 2017 data, even as it acknowledged the risks about NAFTA’s renegotiation.

“Recent data have been strong, inflation is close to target, and the economy is operating roughly at capacity,” the bank said in a statement.

“Consumption and residential investment have been stronger than anticipated, reflecting strong employment growth. Business investment has been increasing at a solid pace, and investment intentions remain positive.”

Moving forward, the bank predicted household spending and investment to gradually contribute less to economic growth, given the higher interest rates and stricter mortgage rules. It predicted Canada’s high levels of household debt would amplify the effects of higher interest rates on consumption.

The rate increase by the Bank of Canada is expected to prompt Canada’s large banks to raise their prime lending rates, a move that will drive up the cost of variable-rate mortgages and other variable-interest rate loans.

Exports have been weaker than anticipated, but are still expected to contribute a larger share of Canada’s growth, the bank said. It also noted that government infrastructure spending has helped lift economic activity.

The Bank of Canada said the unknowns of the NAFTA’s renegotiation are continuing to weigh on its forecast and have created a drag on investment and exports.

“Today’s rate hike was a rear-view mirror move, but the Bank of Canada hints that the view out the front window isn’t quite as sunny,” CIBC chief economist Avery Shenfeld wrote in a research note to clients after the rate announcement.

“We share the Bank of Canada’s view that higher rates will be needed over time. But perhaps not as fast and furious as the market was starting to think. The bank’s statement put NAFTA uncertainties right up front.”

The Bank of Canada warned that lower corporate taxes in the U.S. could encourage firms to redirect some of their business investments south of the border. On the other hand, it predicted that Canada will see a small benefit from the recent U.S. tax changes thanks to increased demand.

The bank also released new economic projections Wednesday in its latest monetary policy report.

For 2017, it’s now predicting three per cent growth, as measured by real gross domestic product, compared with its 3.1 per cent prediction in October.

The bank slightly increased its predictions for 2018, up to 2.2 per cent from 2.1 per cent. It expects the economy to expand by 1.6 per cent in 2019, up from its previous call of 1.5 per cent.

The fourth quarter of 2017 and the first quarter of 2018 are each expected to see annualized growth of 2.5 per cent.

Governor Stephen Poloz raised rates in July and September in response to a surprisingly strong economic run that began in late 2016. The hikes took back the two rate cuts he introduced in 2015 to help cushion, and stimulate, the economy from the collapse in oil prices.

Up until a couple of weeks ago, many forecasters still had doubts that Poloz would raise the rate Wednesday. However, two strong reports _ the December jobs data and the bank’s business outlook survey led many experts to change their calls.

Heading into the decision Wednesday, Scotiabank Economics forecasted three hikes totalling 75 basis points throughout 2018 and three more in 2019. TD Economics expected a gradual pace of tightening over the next two years of about 25 basis points every six months.

Nissan Canada data breach may have exposed 1.1M finance customers’ information

Nissan Canada Finance said 1.13 million customers in Canada may be victims of a possible data breach.

By  | Global News

Nissan Canada Finance says the personal information of approximately 1.13 million customers may have been exposed due to a data breach.

In a media release sent Thursday, the company said the breach involved unauthorized person(s) gaining access to the personal information of some customers that have financed their vehicles through Nissan Canada Finance and INFINITI Financial Services Canada.

It’s not yet known how many customers have been impacted.

Nissan Canada became aware of the data breach on Dec. 11, but did not notify customers until Thursday, a spokesperson told Global News.

“We immediately began taking steps to make sure the breach happened, everyone is now being contacted,” a spokesperson said.

The unauthorized access may have impacted the following types of information for some customers:

  • customer name,
  • address
  • vehicle make and model
  • vehicle identification number (VIN)
  • credit score
  • loan amount and monthly payment.

Nissan Canada is still investigating.

There is no indication that customers who financed their vehicles outside of Canada are affected, the company said.

Liz Weston: How to ‘death clean’ your finances

By Liz Weston

THE ASSOCIATED PRESS

The phrase “death cleaning” may sound jarring to unaccustomed ears, but the concept makes sense. It’s about getting rid of excess rather than leaving a mess for your heirs to sort out.

“Death cleaning” is the literal translation of the Swedish word dostadning, which means an uncluttering process that begins as people age. It’s popularized in the new book “The Gentle Art of Swedish Death Cleaning” by Margareta Magnusson.

Magnusson focuses on jettisoning stuff, but most older people’s finances could use a good death cleaning as well. Simplifying and organizing our financial lives can make things easier for us while we’re alive and for our survivors when we’re not.

This task becomes more urgent when we’re in our 50s. Our financial decision-making abilities generally peak around age 53, researchers have found, while rates of cognitive decline and dementia start to climb at age 60. As we age, we tend to become more vulnerable to fraud, scams, unethical advisers and bad judgment, says financial literacy expert Lewis Mandell, author of “What to Do When I Get Stupid.” Cleaning up our finances can help protect us.

Some steps to take:

CONSOLIDATE FINANCIAL ACCOUNTS

Fewer accounts are easier to monitor for suspicious transactions and overlapping investments, plus you may save money on account fees. Your employer may allow you to transfer old 401(k) and IRA accounts into its plan, or you can consolidate them into one IRA. For simplicity, consider swapping individual stocks and bonds for professionally managed mutual funds or exchange-traded funds (but check with a tax pro before you sell any investments held outside retirement funds). Move scattered bank accounts under one roof, but keep in mind that FDIC insurance is generally limited to $250,000 per depositor per institution.

AUTOMATE PAYMENTS

Memory lapses can lead to missed payments, late fees and credit score damage, which can in turn drive up the cost of borrowing and insurance. You can set up regular recurring payments in your bank’s bill payment system, have other bills charged to a credit card and set up an automatic payment so the card balance is paid in full each month. Head off bounced-transaction fees with true overdraft protection, which taps a line of credit or a savings account to pay over-limit transactions.

PRUNE CREDIT CARDS

Certified financial planner Carolyn McClanahan in Jacksonville, Florida, recommends her older clients keep just two credit cards: one for everyday purchases and another for automatic bill payments. Closing accounts can hurt credit scores, though, so wait until you’re reasonably sure you won’t need to apply for a loan before you start dramatically pruning.

SET UP A WATCHDOG

Identify whom you want making decisions for you if you’re incapacitated. Use software or a lawyer to create two durable powers of attorney one for finances, one for health care. You don’t have to name the same person in both, but do name backups in case your original choice can’t serve.

Consider naming someone younger, because someone your age or older could become impaired at the same time you do, says Carolyn Rosenblatt, an elder-law attorney in San Rafael, California, who runs AgingParents.com. Grant online access to your accounts, or at least talk about where your trusted person can find the information she’ll need, Rosenblatt recommends.

Also create. “in case of emergency” files that your trusted person or heirs will need. These might include:

Your will or living trust

Medical directives, powers of attorney, living wills

Birth, death and marriage certificates

Military records

Social Security cards

Car titles, property deeds and other ownership documents

Insurance policies

A list of your financial accounts

Contact information for your attorney, tax pro, financial adviser and insurance agent

Photocopies of passports, driver’s licenses and credit cards

A safe deposit box is not the best repository, because your trusted person may need access outside bank hours. A fireproof safe bolted to a floor in your home, or at minimum a locked file cabinet, may be better, as long as you share the combination or key (or its location) with your trusted person. Scanning paperwork and keeping an encrypted copy in the cloud could help you or someone else recreate your financial life if the originals are lost or destroyed.

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