Aurelia Butler

By comparison, the deficit in the same period a year earlier had been just C$5.54 billion, it said in a statement.Program expenses rose 6.6% on increases across all major categories of spending. Public debt charges jumped by 35.6% largely because of higher interest rates, the ministry said.Year-to-date revenues grew by 2.6%, largely reflecting higher personal income tax revenue and revenue from other taxes and duties.On a monthly basis, Canada posted a deficit of C$4.47 billion in December, compared to a C$1.98 billion deficit in December 2022.($1 = 1.3484 Canadian dollars) More

WASHINGTON (Reuters) – U.S. Federal Reserve officials, facing economic conditions they say lack any clear historical parallel to guide them, continued pushing back this week against a near-term start to interest rate cuts, instead building the case for caution before making a move they are struggling to justify.A run of high-profile speeches on Thursday added emphasis to the previous day’s hawkish readout of January’s policy meeting that bundled together have further shaken investors’ confidence that borrowing costs will fall soon.Coming also on the heels of recent higher-than-expected inflation readings, policymakers put an open-ended formulation around the timing of their first rate cut, with Vice Chair Philip Jefferson saying it was likely but “later this year.”Fed governors Lisa Cook and Christopher Waller later reiterated the now-familiar refrain of needing greater confidence that inflation is on track to return to the Fed’s 2% target before agreeing to rate cuts. Waller spoke of being in “no rush” to cut rates given the latest “hotter-than-expected” readings of employment, economic growth and inflation. Cook, meanwhile, was explicit about her “growing confidence that inflation will continue to ease,” but also said she needed more proof of that before cutting rates.Investors have struggled to stay abreast, but have now pushed back expectations of an initial rate cut to June.”As strong activity data have piled up, Fed officials have become less concerned about the risk of keeping the funds rate too high for too long,” Goldman Sachs economists wrote on Thursday night as they pushed their rate cut call from May to June. DEEPER QUANDARYPolicymakers’ remarks reflect the near consensus at their Jan. 30-31 meeting that, even after a year when inflation declined at a historic pace and by many measures seems set to fall further, the time still wasn’t right to signal the start of rate cuts. “Most participants,” according to meeting minutes, were still focused on the risk that premature rate reductions might allow inflation to rise again and force a damaging policy response to erase it. But the recent commentary also points to a deeper quandary that may be tilting Fed officials toward further delay.The benchmark overnight interest rate has been at 5.25%-5.5% for nearly seven months, still less than the roughly 10-month average rate “hold” in Fed policy cycles since the mid-1990s. Officials know what they gain for each month they wait: More downward pressure on prices through borrowing costs they regard as restrictive, more data to show how inflation is behaving, and more confidence they have the situation under control. For now they neither feel they are paying a price in lost jobs or economic potential for keeping rates where they are nor do they know what they’d gain by cutting them. The economy has held up better than expected in the face of the fastest interest rate increases since the 1980s. If anything that has contributed to uncertainty about whether it reacts to interest rates in the same way it used to – whether financial conditions are, in fact, as restrictive as policymakers believe.One initial argument for rate cuts – that Fed policy should follow inflation lower in order to keep “real” borrowing costs from rising – has now been discounted.Jefferson, asked Thursday why he did not mention the issue as a factor in the rate discussion, said he was only focused on whether supply and demand in the economy appeared to be coming into balance – a view aligned with Fed Chair Jerome Powell’s distaste for unobserved economic parameters, like the “neutral” rate of interest, as a guide to policy.NO RUSHAt his last press conference Powell said the Fed wouldn’t “wait around for the economy to turn down” before cutting interest rates, “because that would be too late.”But there’s been no clear case made yet for what would motivate the start of rate cuts or how they’d be calibrated.Jefferson noted in most cases when the central bank reduces interest rates it is doing so to support a weakening economy, which isn’t the case now.In recent decades the Fed has tackled high inflation, but killed the economy in the process; it has sustained periods of growth with deft rate cuts, but in the absence of excessive price pressures; and it has allowed the unemployment rate to ride along at historically low levels, but that was also because inflation stayed around or even below the 2% target.It has never calibrated rate cuts in the climate policymakers now face: with an inflation surge seemingly controlled but with officials nervous about a rebound; a potentially strong period of purchasing-power recovery underway for workers whose pay is rising faster than prices; and all to the backdrop of a high-stakes presidential election.The situation has left the economics profession all over the map, with some, including a past Fed vice chair, arguing that a rare “soft landing” has already been achieved, others saying the Fed is at risk of letting inflation rekindle with its talk of cuts, and others that the chance of a recession-inducing policy mistake are rising by the month.With no past episode as a guide, Fed officials have started referring to the art and intuition of policymaking, even as they say they remain “data dependent.”Waller was, typically, the most blunt in assessing the situation.”The strength of the economy and the recent data we have received on inflation mean it is appropriate to be patient, careful, methodical, deliberative – pick your favorite synonym. Whatever word you pick, they all translate to one idea: What’s the rush?” More

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(Reuters) -The U.S. dollar was on track to record its first weekly fall in 2024 on Friday, as investors took a breather after almost two months of rises built on subsiding expectations for future Federal Reserve rate cuts.The greenback has bounced this year as strong economic data and warnings from Fed officials the inflation fight was not over supported expectations that rate cuts will be pushed out to June or later in the year.Some analysts recently flagged that the dollar retracement in 2024 has been more significant than in U.S. yields, and further strength over the near term was limited.”It’s not the time yet to sell the dollar, but we think it will start to weaken in the second quarter, assuming that the Fed will cut in June and continue cutting rates once a quarter,” Athanasios Vamvakidis, global head of G10 forex strategy at BofA Global Research, said.BofA expects the euro to strengthen to 1.15 versus the greenback by the end of the year.”If the U.S. economy remains so strong, we have to change our view, as the Fed might not be able to cut in June or not even this year,” he added.The dollar index, which measures the U.S. currency against six others, dropped 0.03% to 103.89 and was set to record its first weekly fall, 0.38%, since the end of December.Some analysts argued that increasing risk-appetite was the main reason behind this week’s dollar correction as the U.S. currency is seen as a safe-haven asset.Global shares capped a record-breaking week after U.S. chipmaker Nvidia (NASDAQ:NVDA)’s blockbuster earnings energised tech stocks.”Once the Nvidia effect has faded, equity markets are left with increasingly stretched valuations as U.S. rates continue to rise,” Francesco Pesole, forex strategist at ING, said.Personal Consumption Expenditures (PCE), the Fed’s favourite inflation gauge, due next week, “should be strong and push rate cut expectations further away,” he added.The euro rose 0.03% to 1.0826 versus the greenback.”The euro zone is slowly healing but is doing so without Germany, and the euro can’t ignore Germany,” said Kit Juckes, macro strategist at Societe Generale (OTC:SCGLY), referring to recent data showing Germany’s economic downturn deepened in February.German business morale improved in February, a survey showed on Friday, though probably not enough to prevent Europe’s biggest economy from slipping into another recession. “Norwegian crown and Swedish crown, or Polish zloty, are a better buy than the euro,” he added.The Swedish crown hit 11.1321 against the euro on Thursday, its highest level since Jan. 2. It was last down 0.13% at 11.161. The Norwegian crown was last down 0.2% to 11.385 against the single currency. YEN WORST PERFORMERThe yen is the worst-performing G10 currency this year, with a 6.3% slide on the dollar. The greenback is the best performer.The Japanese currency headed for a fourth weekly drop as investors chased better yields just about everywhere else, wagering Japan’s rates would stay near zero for some time.For the week, the yen is down 0.8% on the euro, touching its weakest for three months on Thursday at 163.45 per euro. The dollar gained 0.21% versus the Japanese currency in the week to trade at 150.53. Investors can earn interest, or “carry”, by borrowing yen around 0% and buying income-bearing assets in other currencies.”There’s a focus on carry while we’re in a range-bound environment,” said Bank of Singapore strategist Moh Siong Sim, noting that hopes for a yen rally had taken a hit from last week’s data showing an unexpected slide into recession in Japan.With Deutsche Bank’s foreign exchange volatility index collapsing to two-year lows and markets backpedalling on bets for deep rate cuts in the U.S., Europe and Britain – leaving yields elevated – the trade is profitable. “We believe the Bank of Japan (BoJ) will raise rates to zero and stop yield targeting in April. However, this should be already in the price,” said BofA’s Vamvakidis. “For the dollar/yen to weaken, we need the Fed to start cutting rates,” he added. Elsewhere, the flow into higher-yielding currencies helped lift the Australian and New Zealand dollars. China’s yuan has made a steady return since the Lunar New Year holiday break. It barely moved this week at 7.2056 per dollar despite steep cuts to Chinese mortgage rates. More

March futures on the S&P/TSX index were flat at 7:06 a.m. ET (12:06 GMT).The Toronto Stock Exchange’s S&P/TSX composite index ended 0.7% higher at 21,318.08 on Thursday, its highest close since April 15, 2022. The index was boosted by gains in technology and healthcare stocks, after chip designer Nvidia (NASDAQ:NVDA)’s strong quarterly results and forecast. (TO)Wall Street futures also paused for breath on Friday after the benchmark S&P 500 and the Dow Jones Industrial Average hit record closing highs in the previous session. [.N] Fed Governor Christopher Waller said on Thursday U.S. Federal Reserve policymakers should delay interest rate cuts by at least another couple more months. The comments pressured commodity prices, with oil down and set to snap a two-week winning streak. Spot gold and copper prices were pulled down by a stronger dollar. [O/R][GOL/][MET/L] In Canada, investors were poised to keenly monitor upcoming quarterly earnings from banks including Bank of Montreal, Bank of Nova Scotia and the Royal Bank of Canada next week. Financial stocks have the highest weightage on the TSX, constituting about 29.7% of the index, according to LSEG data. In Canadian corporate news, software firm Docebo reported its fourth-quarter results above analysts’ estimates.Oil and gas transporter Pembina Pipeline (NYSE:PBA) reported a higher fourth-quarter profit per share than the previous year. COMMODITIES AT 7:06 a.m. ETGold futures: $2,023.4; +0.1% [GOL/]US crude: $77.33; -1.6% [O/R]Brent crude: $82.42; -1.5% [O/R] More

(Reuters) -U.S. stock index futures took a breather on Friday after a stunning rally in the previous session, spurred by upbeat results from AI poster child Nvidia (NASDAQ:NVDA) that renewed enthusiasm about artificial intelligence.The S&P 500 and Dow Jones Industrial Average surged to record closing highs on Thursday, while the tech-heavy Nasdaq was a whisker away from its all-time high, as investors piled into technology stocks with the AI-fueled frenzy on Wall Street gaining more steam.Nvidia added $277 billion in stock market value on Thursday, Wall Street’s largest one-day gain in history. Shares of the heavyweight chip designer were up 1.8% in premarket trade on Friday and the company is closing in on $2 trillion in market value for the first time.”Yesterday’s rally was exceptional and now the markets are consolidating,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, but added that the AI-fueled momentum is expected to persist this year.”Yes, the valuations are going high, but earnings are going high as well. So there is something really material and big happening right now as a fundamental support to the technology rally.”Corporate earnings have been robust in the fourth quarter, with 78.5% of the 437 companies in the S&P 500 that have reported earnings so far exceeding estimates, compared with the annual 76% average, according to LSEG data on Thursday.Most megacap stocks were subdued on Friday, with Tesla (NASDAQ:TSLA), Amazon.com (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) down between 0.3% and 0.9%. At 07:00 a.m. ET, Dow e-minis were up 39 points, or 0.1%, S&P 500 e-minis were up 1.75 points, or 0.03%, and Nasdaq 100 e-minis were down 8.75 points, or 0.05%.Still, all the three major indexes were set for weekly gains after turbulence in the prior week when hotter-than-expected inflation data dampened expectations of early interest rate cuts from the U.S. Federal Reserve.Traders firmed up bets against any U.S. interest-rate cuts before June after Fed Governor Christopher Waller on Thursday said he was in “no rush” to lower rates. Among other stocks, Carvana surged 30.7% on reporting its first-ever annual profit, helped by its pact with bondholders to cut its outstanding debt by $1 billion.Super Micro Computer (NASDAQ:SMCI) fell 5% after it announced pricing of $1.5 billion convertible senior notes.Jack Dorsey-led Block jumped 15.4% after the payments firm forecast adjusted core earnings for the current quarter above Wall Street estimates, betting on consumer resilience. More

The BofA report showed the equity market rally is broadening beyond the mega caps, as U.S. small cap funds logged their largest weekly inflow in the week to Wednesday since June 2022, at $5.1 billion. BofA said in its weekly roundup of fund flows in and out of world markets citing EPFR data, that flows to cash were running at an annualised rate of $1.3 trillion in the first weeks of 2024 through to Feb. 21. Investors can often opt for cash when they are less confident, but with interest rates at elevated levels and looking less likely to drop in the very near term, cash-equivalent money market funds have drawn in flows. In the latest week, as the S&P 500 hit record highs, investors put $15.2 billion into bonds, including $10.2 billion into investment-grade bond funds, which logged a 16th straight week of inflows, the longest such stretch since October 2021, BofA said.The S&P this month topped the 5,000-mark for the first time ever, thanks to a surge in the so-called “Magnificent Seven” most valuable stocks that include the likes of Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and AI darling Nvidia (NASDAQ:NVDA).BofA’s “Bull & Bear” indicator remained at 6.6 for the latest week, tilting into “bullish territory”, but the bank said this was not overly stretched. On a scale up to 10, a reading above 6 is straying into bullish territory and below 5 is moving into bearish territory. “Positioning (is) not yet at extreme bullish, but (it) won’t take too long,” BofA said in the report.Last week was also the first time since September that both energy and raw materials funds registered a weekly inflow, according to the report. More