Latest news with #BoC
Yahoo
3 days ago
- Business
- Yahoo
'Financial fragility is deepening': Canadian credit card data for Q1 show growing strain
Signs of deteriorating credit health among the most financially vulnerable Canadians are a 'flashing signal,' credit analytics firm FICO says. New credit card data for the first quarter of 2025 show an increasing reliance on credit cards and more Canadians having trouble paying their balances, FICO says, with issues most pronounced among younger and 'thin-file' borrowers — people without much of a credit history. 'Consumers with fewer banking relationships — particularly younger individuals or those relying solely on credit products — are under increasing pressure,' FICO's report says. 'The surge in serious delinquencies among monoline borrowers' — people with credit cards issued by firms that don't offer other banking services — 'is a flashing signal: financial fragility is deepening where there is the least cushion.' Economists at financial institutions and the Bank of Canada (BoC) have been paying close attention to Canadians' spending and credit health as ongoing trade tensions with the U.S. roil the economy. In a speech in early June, BoC deputy governor Sharon Kozicki noted that credit card data is one way the Bank can better understand Canadians' 'real-time spending patterns.' FICO's data show Canadians are paying down less of their credit card balances on average, and note that 'average balances remain elevated' and are rising again from COVID-era lows, when spending was generally restrained. On average, Canadians repaid just over 47 per cent of their balances in March, down from a pandemic peak of 60 per cent in September 2022. Balances have risen to $3,098 from $2,938 during the pandemic. 'Although still below pre-pandemic highs, the recent upward trajectory signals renewed pressure on household finances, potentially from rising living costs or shifting spending habits,' FICO's report said. FICO notes that the rising balances aren't a consequence of higher spending — average monthly spending was down 4.2 per cent from the same period last year, to $1,549, which FICO says 'reflects more cautious consumer behaviour or financial constraint as households rebalance their budgets.' Overall, rates of missed payments are 'broadly stable,' FICO says, but risks are concentrated in some borrower segments. Those missing a single payment was up eight per cent from last year, which FICO says 'points to the beginning of strain among a growing portion of the population.' Among monoline borrowers, who can have lower credit ratings, FICO notes a 'key turning point' in January, when the proportion missing two or more payments hit a five-year high. 'This spike highlights sustained pressure on higher-risk segments — particularly those with limited financial history, fewer products with a financial institution, or recent entry into the credit market,' FICO's report says. John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on X @jmacf. Download the Yahoo Finance app, available for Apple and Android.
Globe and Mail
6 days ago
- Business
- Globe and Mail
Bank of Canada summary details council's concerns over trade war in June rate decision
Members of the Bank of Canada governing council were concerned that underlying inflationary pressures led by trade disruption and uncertainty could persist for a long time, minutes of the meeting showed on Tuesday. The central bank held its key benchmark rate at 2.75% on June 4, citing the need to monitor the impact of U.S. tariffs on Canada and on rest of the world and how businesses and consumers adapted to it. Its summary of deliberations showed the members took into consideration the unexpected firmness in inflation data to take its rates decision and that the team spent considerable amount of time probing how trade policy was influencing prices. Former BoC head Poloz says investors should consider hedging against global inflation risk 'Underlying inflationary pressures could persist for an extended period as consumers and businesses adapt to the rewiring of global trade,' the minutes said, even as the members acknowledged there could be downward pressure on prices too. Businesses have been reporting that they would pass on higher costs stemming from trade disruptions, the members noted, adding that surveys showed that even consumers see prices rising. Canada's annual inflation rate fell to 1.7% in April due to some tax removal, but closely tracked core measures of inflation rose above the bank's target range of 1% to 3% in the same month, stoking concerns that inflation was firming up. The governing council excluding impact of taxes, inflation was 2.3%, which was slightly above expectations. The fall in the rate of inflation to below 2% had helped the BoC to cut interest rates aggressively by 225 basis points since June last year, but the uncertainty and subsequent tariffs imposed by President Donald Trump has disrupted the bank's predictions. 'Members agreed that cost increases from trade disruptions may be playing a role in inflation in goods prices, but the direct impact from retaliatory tariffs was not yet evident,' the summary said. The rate-setting team acknowledged that the pass-through of higher input costs to consumer prices would be difficult to track going forward. The governing council will closely track how inflationary pressures are evolving and carefully assess the timing and strength of the downward pressure on inflation from a weaker economy and the upward pressure on inflation from higher costs, the members agreed. The deliberations said if the recent firmness in underlying inflation were to persist, it would be more difficult to cut the policy rate. However, if the economy weakens and cost pressures are contained, there could be a need to cut rates in the future.
Yahoo
12-06-2025
- Business
- Yahoo
'We do not see USD/CAD below 1.30': BofA's Du remains cautious on loonie's upside
-- Bank of America (NYSE:BAC) strategist Howard Du has trimmed the near-term forecast for USD/CAD to 1.38, citing balanced market forces in play as Canada's economy attempts to navigate slowing growth, diverging monetary policy, and shifting investor sentiment. In his mid-year update, Du underscored that the foreign exchange pair continues to face 'two-sided near-term risks' as stronger-than-expected GDP figures and equity outperformance offset dovish signals from the Bank of Canada. Markets have become increasingly bearish on Canada's economic outlook, with consensus expecting Q2 GDP to contract 1% on a seasonally adjusted annualized basis. However, BofA projects a more moderate decline of just -0.2%, aligning with the BoC's more constructive Scenario 1 outlook from its April Monetary Policy Report. Canadian equities have also provided an unexpected tailwind for the loonie. Since early April, TSX returns have outpaced global peers outside of the U.S., a trend BofA expects to continue as domestic cyclical indicators improve. Despite these supportive forces, Du sees rate divergence as a limiting factor for Canadian dollar strength. He anticipates the BoC will cut policy rates three times in 2025 once core inflation retreats and notes that the labor market remains under stress with no peak yet in unemployment. In the longer term, Du maintains that USD/CAD will trend gradually lower, extending a target of 1.35 into 2027. 'We do not see USD/CAD below 1.30 in our current forecast horizon; Fed-BoC rate divergence and equilibrium are the supports,' he wrote in the report. At the 1.30 level, CAD would no longer be undervalued against its long-term equilibrium range, according to BofA's valuation models. However, unless global capital flows drive a sustained de-dollarization regime, Du believes investors will be reluctant to unwind the USD's premium from recent years. USD dynamics are also shifting as foreign exchange markets become more tied to equities than interest rate spreads. Still, Du flagged that 'rates market moving from the current one BoC cut pricing to three cuts should still exert some upward pressure for USD/CAD' even amid changing correlations. Related articles 'We do not see USD/CAD below 1.30': BofA's Du remains cautious on loonie's upside EUR/USD poised to rack up more gains as ECB and Fed rate paths set to diverge BofA stays bearish on the U.S. dollar Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Recorder
06-06-2025
- Business
- Business Recorder
Surprise jobs gain helps Canadian dollar hold on to weekly move higher
TORONTO: The Canadian dollar edged lower against its U.S. counterpart on Friday but was holding on to a weekly gain, as stronger-than-expected domestic jobs data bolstered expectations the Bank of Canada would keep rates on hold next month. The loonie was trading nearly 0.1% lower at 1.3685 per U.S. dollar, or 73.07 U.S. cents, after moving in a range of 1.3661 to 1.3704. On Thursday, the currency touched an eight-month high at 1.3632, while it was on track for a weekly gain of 0.4%. Canada's economy added 8,800 jobs last month, compared to an expected decline of 12,500. The unemployment rate, however, climbed to 7%, its highest level in almost nine years, excluding the peak of the COVID-19 pandemic. 'A lot of part-time jobs were lost and they became full-time jobs. Net-net I think it's a good thing,' said Marc Chandler,chief market strategist at Bannockburn Global Forex LLC. 'It's also clear that the Bank of Canada is not going to be in a hurry to cut rates again. There still might be another rate cut coming but later this year.' Investors see a 73% chance the BoC keeps its benchmark interest rate on hold at 2.75% in July, up from 67% before the data. On Wednesday, the central bank refrained from cutting rates for a second straight meeting, citing the need to study the effects of U.S. trade policy. U.S. jobs data was also stronger than expected, which boosted the U.S. dollar against a basket of major currencies. The price of oil, one of Canada's major exports, rose on optimism about U.S.-China trade talks. U.S. crude oil futures traded nearly 2% higher at $64.62 a barrel. Canadian bond yields moved higher across the curve, tracking moves in U.S. Treasuries. The 10-year was up 7.2 basis points at 3.327%, trading at its highest level since May 26.
Yahoo
05-06-2025
- Business
- Yahoo
BofA: Bank of Canada in no rush to ease despite dovish hints
-- Bank of America (NYSE:BAC) Securities said the Bank of Canada's decision to hold its policy rate at 2.75% reflects a wait-and-see approach amid persistent inflation and geopolitical trade uncertainties. The central bank's June 4 announcement kept rates unchanged, in line with expectations, while highlighting 'some unexpected firmness in recent inflation data' and ongoing concerns over U.S. tariffs. BoC Governor Tiff Macklem noted, 'There was a clear consensus to hold policy unchanged as we gain more information.' The central bank's stance suggests it is prioritizing stability while awaiting further data on inflation and growth momentum. Carlos Capistran, economist at BofA Securities, said the Bank's statement and press conference indicated a slightly more dovish tilt, pointing to a willingness to ease policy if economic conditions deteriorate. Macklem remarked that 'members thought there could be a need for a reduction in the policy rate if the economy weakens… and cost pressures on inflation are contained,' signaling potential future cuts. Still, Capistran emphasized the BoC's caution in rushing to cut rates, particularly given sticky core inflation readings. 'Underlying inflation could be a bit firmer than we thought,' Macklem acknowledged during the Q&A, reinforcing the Bank's stance to assess incoming data closely before making changes. Capistran expects the BoC to hold its policy rate at 2.75% at the July meeting and begin cutting rates in the fall. BofA forecasts three 25bp reductions in September, October, and December, which would take the benchmark rate to 2.00% by year-end. Market reaction in the rates complex was notably dovish, with Canadian yields declining across the curve. Capistran said the move validated BofA's tactical positioning, and the firm has since closed its pay June BoC OIS trade at target. In currency markets, USD/CAD slid below 1.37 to a new 2025 low after softer U.S. ISM services data compounded the BoC's caution. Capistran said the pair's near-term direction will be shaped by labor reports from both countries, with a stronger-than-expected Canadian print potentially extending recent CAD gains. Capistran remains skeptical of current market pricing, which implies roughly a 50% chance of a July rate cut. 'We see the probability of a cut as currently overpriced,' he argued, noting that two CPI and two labor reports still lie ahead before the BoC's next policy decision. Related articles BofA: Bank of Canada in no rush to ease despite dovish hints Citadel's Griffin: cost of U.S. default insurance is "unfathomable" Tariffs, oil prices, and a stronger Loonie drag Canada's April exports down 10.8% Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
