Aurelia Butler

OTTAWA (Reuters) – The Canadian government will present its fall economic statement on Dec. 16, the finance ministry said on Monday, announcing a date for the budget update that will show the government’s revised deficit estimate.The mid-fiscal-year mini budget will be presented later than usual due to gridlock in parliamentary proceedings, Finance Minister Chrystia Freeland said last week, adding that the mini budget will have details of spending and fiscal anchors.”Our government is focused on delivering fairness for every generation … I look forward to presenting the next steps in our economic plan to deliver a good middle class life for everyone,” Freeland said in a statement on Monday.The mini budget will come at a time of increased uncertainty about the future of Prime Minister Justin Trudeau’s minority government since losing the support of the New Democratic Party and a threat of tariffs from U.S. President-elect Donald Trump. An election is due by late October 2025.The budget update may contain spending measures to shore up Canada’s border with the United States, which Trudeau promised Trump at a surprise meeting between the two in Florida in late November.Freeland, after postponing the government’s debt-reduction goals twice in 2023, promised a 2023-24 deficit at or below C$40.1 billion ($28.36 billion), to reduce the debt-to-GDP ratio, and to keep the deficit-to-GDP ratio below 1% by 2026-27 and beyond.Some economists have said the targets are precarious as growth slows and spending temptations increase in an election year.”Canada faces significant economic and fiscal challenges, including low innovation and productivity, an aging population, and geopolitical pressures that could disrupt trade flows. In this environment, fiscal prudence is essential,” Business Council of Canada senior vice president Robert Asselin said in a statement.”The government must use the December 16th Fall Economic Statement to prioritize effectively and adopt greater fiscal discipline,” Asselin said.Trudeau’s Liberal government, trailing opposition Conservatives in polls over issues including the cost of living, has already survived two confidence votes, and measures in the mini budget could present his rivals another opportunity to bring him down. Freeland’s mini budget will coincide with Bank of Canada Governor Tiff Macklem’s annual address to Canadians. Macklem is expected to speak about progress in bringing inflation back to target and new challenges on the horizon in a speech at the Greater Vancouver Board of Trade at 12:35 p.m. (2030 GMT) on the same day.($1 = 1.4139 Canadian dollars) More

“[W]hile the Fed will cut next week, the Fed’s consensus (median) will be to tilt the outlook in a more hawkish direction than in September or November,” Macquarie analysts noted.A 25bps rate cut  for Dec. 18 is nearly priced it at 90.1%, according to Investing.com’s Fed Rate Monitor Tool. The recent slowdown in the pace of U.S. disinflation, a lower unemployment rate than anticipated in September, and exuberance in US financial markets are contributing to this more hawkish stance, they added.The unemployment rate remains low,  and lower than the 4.4% projection for Q4 in the Fed’s September Summary of Economic Projections, Wage disinflation, meanwhile, has slowed in recent months, becoming “sticky,” the analysts said, similar to core PCE inflation and other measures of the common component of inflation.Against the backdrop of slowing disinflation, U.S. equity multiples have also risen to rarely seen levels, while credit risk spreads are at their tightest levels of the post-pandemic period.The analysts also highlight another factor that could make the Fed more cautious: the drawdown of the Treasury’s General Account at the Fed once the debt ceiling becomes binding on Jan. 1, 2025.This could be “stimulative for the inflation and the stock market,” the analysts said, forecasting “upwards of USD 400bn may be released as new liquidity.””[T]he Fed may not wish to augment this by signaling that policy rates will go much lower in Q1 2025,” the analysts added. More

Citigroup’s revision came after data on Friday showed nonfarm payrolls rose by 227,000 jobs last month, following an upward revision to 36,000 jobs in October. Economists surveyed by Reuters had predicted a gain of 200,000 jobs, compared with the initially reported increase of 12,000 in October.U.S. job growth surged in November after being severely hindered by hurricanes and strikes, but a rise in the unemployment rate to 4.2% pointed to an easing labor market that indicated the Fed could likely cut interest rates this month.Major brokerages including Morgan Stanley (NYSE:MS) and Goldman Sachs have reiterated their expectation of a 25-basis-point interest rate cut by the Fed in December after the jobs data.”The report was not quite soft enough for the Fed to cut 50bp as we had projected for December, but a 25bp cut in December appears very likely,” Citigroup analysts said in a note dated Dec. 6.”We expect the Fed to continue to cut in 25bp increments at each upcoming meeting to a terminal policy rate of 3.00-3.25%,” they added.In a separate note dated Dec. 6, Citigroup introduced its 2025 year-end target for the S&P 500 index at 6500 and maintained its “positive” view on U.S. equities going into 2025. More

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