Economy

The conditions for the greatest bond bull market in modern history were set in the 1970s, when inflation hit runaway levels. Central banks, led by the US Federal Reserve, launched a draconian response, pushing interest rates sky-high. Over the 40 deflationary years to the end of 2021, the annualised real return on bonds in the world bond index was 6.3 per cent, not far short of the 7.4 per cent return on global equities over the same period. So says the invaluable Credit Suisse Global Investment Returns Yearbook prepared by economists Elroy Dimson, Paul Marsh and Mike Staunton. As today’s central bankers doggedly pursue interest rate policies dubbed “higher for longer”, many investors have taken a bet, so far unrewarding, on history repeating itself.Yet it is important to bear in mind that the equity-like returns on government bonds in this golden period were a mixed blessing for investors. Moreover, this spectacular 40-year run created a new mythology of bond investing, along with a perversely misleading vocabulary. Academic economists and actuarial consultants declared government bonds were “safe” assets that delivered a risk-free interest rate. They also claimed that bonds offered diversification against risky equities, an argument that provided the rationale for the hallowed 60/40 portfolio split between equities and bonds.But in much of the developed world the yield on many government bonds before 2022 was negative in both nominal and real terms, which is a curious kind of risk-free rate. Such bonds offered the certainty to investors of a guaranteed loss on maturity. As for safety, global bonds offered a real return in 2022 of minus 27 per cent, with UK gilts performing even worse than that. The reality is that nothing in capital markets is ever risk-free. This collision of myth with reality has serious implications not only for governments and regulators. It affects individual investors, who are contemplating how they should respond to the new landscape of bonds; the UK’s fixed-term mortgage borrowers, whose home loan rates are heavily influenced by the path of gilt yields; and pension savers looking to reduce the volatility in their pension investments as they approach retirement.The illusion of protectionParadoxically, investors in longer-dated index-linked bonds last year saw their investment decline by one-third or more in value on a mark-to-market basis.Many bought on the erroneous assumption that they were acquiring protection against rising inflation. Yet the protection only operates if the index-linked bond is held to maturity. In fact index-linked gilt prices are driven by relative real yields, not inflation. So if nominal gilt yields rise, index-linked gilt yields have to rise to offer a competitive return, which destroys capital value regardless of what is happening to the general price level, since rising yields mean falling prices.This is particularly disastrous for people in UK defined contribution pension schemes where the great majority take a default option that involves switching into supposedly safe assets such as fixed interest and index-linked gilts as retirement approaches. Investment consultants call this process “de-risking”, a phrase of outrageous terminological inexactitude (to borrow Churchill’s memorable coinage). Such switching exposed people to big capital losses. To make matters worse, bond prices fell in tandem with equities in 2022. So much for diversification. Earlier equity-like returns came with equity-like volatility.The good news today is that bonds no longer offer terrible value as they did before 2022. But do not expect them to deliver anything like the return of the 40-year golden age. While central bankers tend to attribute low inflation during this period to their sagacity, the real driver of disinflation was globalisation. The global labour market shock resulting from China and eastern European countries joining the global trading system eroded the bargaining power of labour in the developed world. Increasingly complex cross-border supply chains added further disinflationary impetus.This has now gone into reverse due to the Russian invasion of Ukraine and geopolitical friction between China and the West. At the same time, stagnant real incomes in advanced countries, resulting from global labour market pressure, have spawned populist politics and a retreat into protectionism. And as academics Manoj Pradhan and Charles Goodhart have argued in a recent book the ageing of populations in the developed world will cause labour markets to shrink, so re-empowering workers. How, then, given these renewed inflationary pressures, can a case be made for a bond bull market?An uncertain outlookOne obvious starting point is that if you believe central banks will ultimately bring inflation down close to their targets of around 2 per cent then current yields of 4 to 5 per cent on UK gilts and US Treasuries represent good value, especially relative to equities, where earnings estimates look unduly optimistic in the US and, perhaps also, the UK.There is, in addition, a serious possibility of monetary overkill. Central bankers are steering policy using backward-looking data. In the US, the UK and the eurozone they are not much interested in forecasting the money supply. The reason is that soon after monetarism became fashionable in the 1980s the correlation between broad money and consumer price inflation had broken down.Chris Watling, chief executive at research company Longview Economics, sees the breakdown as a consequence of financialisation. That is, most newly created money since governments started to deregulate finance in the early 1980s fed into asset prices rather than goods and services in the real economy. A notable example of this was the growth of mortgage debt which has gone from around 10-20 per cent of gross domestic product to more than 100 per cent in many countries. In the UK it peaked at just short of 80 per cent in 2010.More recently, money creation since the 2007-09 financial crisis has been driven by the central banks’ asset purchasing programmes, known as quantitative easing. This, too, has gone into asset price inflation, mainly in government bond markets.Watling argues that this pattern has now been broken and that the latest bout of inflation stems from money creation during the pandemic going into households’ and businesses’ bank accounts in the form of emergency grants, furlough payments and other support. This was then spent, leading to old-style inflation, in which too much money chased too few goods and services.Lending support to the argument is the fact that monetarist economists such as Tim Congdon in the UK and Steve Hanke in the US were making prescient forecasts about an inflationary surge back in 2021 when central bankers, relying on complex but unhelpful economic models with no money supply input, were declaring that inflation would be transient. Both economists are now forecasting incipient recession in the light of the contraction in broad money in the US and the eurozone and very low money growth in the UK, where banks are adjusting their balance sheets in line with tougher capital requirements.So far the falls in real money balances have not done too much damage, according to Congdon, because they have only offset the overhang of money from excessive monetary growth in 2020 and 2021. But ratios of money to GDP are declining fast.Recession brings the risk of deflation which is, of course, good for bonds as weak demand in the economy causes interest rates to fall and bond prices to rise. The recent weakness of commodity prices further highlights the potential in the short term for deflation.The case againstWhat are the counterarguments to bond bulls? The first might be the enormous uncertainty surrounding the outcome of the monetary experiment conducted by central banks since the financial crisis. Having expanded their balance sheets hugely they are now keen to shrink them in the interests of preserving their anti-inflationary credentials — a process known as quantitative tightening. This is uncharted territory in monetary policy. The big question is, with central banks selling, who will buy government IOUs at a time of great public spending pressure?Apart from the increase in spending because of the pandemic there will be big demands on the public purse not only for a continuing rise in healthcare bills but for infrastructure investment in the transition to low carbon. Ageing populations mean bigger pension bills. The war in Ukraine and wider geopolitical friction make higher defence spending necessary.This is happening against the background of a pressing increase in global indebtedness. The Institute of International Finance, a trade body, estimates that global debt at $305tn is now $45tn higher than its pre-pandemic level. In the UK public sector net debt stood at 100.1 per cent of GDP in May, topping 100 per cent for the first time in 62 years. This raises questions about the potential conflict between central banks’ objectives — price stability and financial stability. Higher for longer means many households and corporations will be at greater risk of default. That in turn is potentially destabilising for the banking system. So, too, is the fall in bond prices as monetary policy has tightened. The bonds in bank balance sheets have fallen in value. This has tilted some regional banks in the US such as Silicon Valley Bank into insolvency. The same could happen in Europe, especially on the continent, where banks have often been pressed into holding large quantities of their governments’ paper.A particular difficulty arises because of the migration of risk from the conventional banking system to the dangerously opaque non-bank financial sector. It is difficult for financial regulators to keep track of the related risks.An indication of this came with the liquidity crisis in the UK gilt market last autumn, in the wake of a Budget under Liz Truss’s government that wrongfooted many pension funds which pursued so-called “liability driven investment strategies”. They were unable to meet calls for more collateral as gilt yields rose and prices fell. The Bank of England moved swiftly to act as a last resort buyer of long-dated gilts and postponed quantitative tightening, thereby forestalling a potentially systemic financial collapse. But will future crises in the non-bank financial area be so swiftly and readily managed?This is a world in which financial stability may take priority over inflation fighting. Indeed, some economists argue that it should. Willem Buiter, former chief economist of Citigroup and a former member of the Bank of England’s monetary policy committee, believes financial stability has to come first because it is a precondition for the effective pursuit of price stability. That would not be good news for bond investors in the short term, since loosening policy to address financial instability reopens the possibility of inflation through money creation.Will central banks keep calm and carry on? Above all there is a question whether central banks will hold their nerve if they confront political pressures when overborrowed companies and homeowners plunge into default in a recession. Their much-vaunted independence will be at risk. That highlights the existence of another potential conflict in central banks’ objectives — that between inflation fighting and career risk. Politicians rarely thank central bankers for curbing inflation if it comes at the cost of higher unemployment. The logic of inflicting a short, shallow recession to avoid having a longer, deeper one later has no purchase in the political market place.Policymakers are also conscious that inflation is actually a solution to outsized public sector debt at levels that have hitherto only been seen in wartime. The key to reducing wartime debt has always been a combination of economic growth, fiscal restraint (meaning austerity), artificial restraints on interest rates (known as financial repression) or surprise inflation. That said, we are in a much lower growth world than in the three decades after 1945 and financial repression is harder to pull off now that capital flows across national borders. It is not hard to envisage circumstances in which central banks choose to stretch out the period over which they seek to return inflation to target, so facilitating a reduction in the real value of the debt. Or, again, governments could raise inflation targets, say, to three per cent while arguing that this is more realistic given the structurally higher inflation that we face in the 2020s. But this option would only be available in countries where monetary policy is perceived to have been effective. The Bank of England’s much poorer performance on inflation control when compared with the Federal Reserve and the European Central Bank has so damaged its credibility that a move to a higher target might cause market turmoil.A final difficulty with the bullish case for bonds is simply that it might take higher policy rates than the market now anticipates to curb the second-round effects of inflation in labour and other markets as people try to recoup income that has badly shrunk in real terms. This distributional struggle could last longer than generally expected. And in financial markets there always lurk what Donald Rumsfeld, when US Secretary of Defense, called unknown unknowns.If investors believe that it will take a recession to bring inflation back to target, then it makes sense for them to allocate more money to bonds. Some may feel gold is a better option in current circumstances where inflation is proving more sticky than expected. Yet gold is a bet on monetary policy failure. If you believe central banks will fulfil their anti-inflationary mission, the opportunity cost of holding the yellow metal that yields no income when interest rates are rising is unacceptably high.The hope must be that the central banks achieve a smooth reconciliation between financial stability and price stability. Resorting once again to the liquidity tap when markets take the next big tumble will simply propel the debt mountain higher through another morally hazardous reduction in borrowing costs. That way lies potentially uncontrollable inflationary consequences, resulting in more populist politics and wholesale destruction of savings. More

Imagine two countries. The first is proudly Christian, it allowed racial segregation in living memory and racism is mentioned more frequently in its media than anywhere else in the developed world. The second is strictly secular and legally prohibits the collection of data on people’s race, a conscious effort by its leaders to avoid using ethnicity to differentiate or divide.Which do you think would offer people from diverse racial and religious backgrounds the best prospects of success? Of becoming equal participants in society? The answers revealed in the data are surprising. In 2021, US unemployment was 5.5 per cent for those born in the country, and 5.6 per cent for those born overseas. Black and white employment rates are now neck and neck. In France, unemployment is seven per cent among those born in the country, but 12 per cent for immigrants, rising past 17 per cent among those who arrived in the last ten years. Comparisons with Britain, whose demographics and colonial history perhaps make for a fairer benchmark, are similarly damning.

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Following a week of rioting across France, spurred by the death of a teenager of North African descent shot dead by police at a traffic stop, these statistics are worth revisiting. While the number of arrests has declined this week, the need for a serious conversation about how France continues to fail its immigrant communities and their neighbourhoods remains.Just as in France’s 2005 bout of urban violence, or London’s own riots in 2011, fractious relations between police and ethnic minorities provided the spark for unrest fuelled by deprivation and social exclusion. Rioters tend to come disproportionately from disadvantaged neighbourhoods: those who don’t have a stake in society have little to lose in burning it down. Across the west, young black and brown men have grown bitterly used to being disproportionately targeted by police stop and searches, but the magnitude of the disparity in France is shocking. In London, black people are between two and three times as likely to be apprehended as their white counterparts, but in Paris the figure rises to six times, and almost eight times for those of Arab origin.Encounters with French police are more lethal, too, as officers are routinely armed and are allowed to shoot at people who don’t comply with traffic stops if they are deemed to pose a safety risk. There were 26 fatal police shootings in France in 2022, compared to just 2 in the UK, and in the past 18 months French police have shot dead 17 people during traffic stops such as that which sparked the latest riots.Last Friday as the unrest escalated, the two largest police unions released a statement declaring they were “at war” with “vermin” and “savage hordes”. This culture of hostility has grown since Nicolas Sarkozy abandoned neighbourhood policing two decades ago, in favour of more repressive tactics. A future government led by Marine Le Pen’s far-right party would surely only lean into the adversarial approach.And there is little sign of improvement on integration. One in five of France’s foreign-born population believe they are discriminated against, the joint highest with Italy in the developed world. Meanwhile France’s immigrants are almost three times as likely as those born in the country to be in poverty. In the UK, the poverty rates between immigrants and others are the same.This French disparity is compounded by decades of failed urban policy resulting in immigrant communities being concentrated in the banlieues, emphasising their otherness and hampering social mobility. The cheek-by-jowl nature of wealth and poverty in London comes with its own problems, but has been a buttress against the ossification of inequality seen in France. Twenty-eight per cent of recent French immigrants are now in the lowest tenth of earners, compared to just eight per cent of non-immigrants. In the UK, the figure is ten per cent regardless of country of birth.Despite claims that France is race-blind, the data tells a different story. Without reforms in both policing and social exclusion, there is little hope that these violent episodes will cease any time [email protected], @jburnmurdoch More

The writer served in the White House as special assistant to the president and senior director for international economics from 2021 to 2023Fast forward to 2031. The EU exhausted its €250bn Green Deal months ago; the US Inflation Reduction Act is also winding down, and things are not going well. Electric vehicle sales have been stymied by global shortages and price spikes in lithium and other minerals. Without enough minerals to stock assembly lines, workers across America’s ‘Battery Belt’ are furloughed, with similar supply problems plaguing Europe. Talks with the new critical minerals producers’ cartel have been halting, partly because China — having acquired large stakes in the mines of member countries — is directing supply to its own battery manufacturers. It doesn’t need to be this way. Industry analysts are all flashing the same warning lights: achieving the energy transition will demand far more lithium and other minerals by 2030 than the world is on track to produce. Responsibly boosting global production is paramount. Avoiding critical minerals shortages will require some 330 new mines over the next decade, according to Benchmark Minerals, even assuming maximum progress on recycling. This includes 59 new lithium mines; the world currently has a couple of dozen. This is not a problem any country can solve alone. The magnitude of supply needed to fend off looming shortfalls is larger than any one nation could conceivably mine. The US and its partners can and should co-operate to boost overseas production. Neither is it a problem the market can easily manage by itself. There are several reasons to doubt the old saying, “the cure for high prices is high prices”. After all, lithium prices have risen 800 per cent over the past three years — and still, mining companies, wary of price volatility, aren’t investing anywhere near the rates needed.America’s recent critical minerals deals with Japan, and soon Europe, offer a promising opening. But to avoid global shortages, policymakers must go much further. To start with, they’ll need to bring exporters to the table, not just buyers — stitching Washington’s bilateral deals with Japan and the EU into a new critical minerals pact with leading net importing and exporting countries. Absent this sort of expansion, the world could read US agreements with Tokyo and Brussels as an attempted ‘buyers club’, which risks stoking calls from some exporters to form an Opec-like cartel for critical minerals.To make a new minerals club work, buyer countries should offer incentives to responsibly expand production. This starts with treating battery minerals as essential commodities and adapting policy accordingly. Just as with agriculture and oil, tailored measures such as price insurance — essentially a contract giving the seller an option to sell a certain quantity of minerals at a given price and time — will be important for encouraging investment amid high price volatility. The US and other net importers could also offer tariff reductions, concessional financing and access to technology, all contingent on stronger labour and environmental standards. Next, the US and other net importers should couple longer-term purchase agreements with more generous value sharing and royalty models for exporting governments. Mining executives have told me they would oblige so long as mineral-rich governments guarantee existing investments will not be nationalised, which seems reasonable. Third, all sides would agree to diversify their supply chains which is especially important in areas like minerals processing, where China controls roughly 85 per cent of the market. Members would also co-operate on demand-reducing innovation and recycling. The magnitude of the predicted deficits implies a bet on technology. But the most promising technologies — such as batteries that use sodium instead of lithium — still face real hurdles. With these measures, everyone wins: supply is boosted, and net exporters gain investment and more generous terms on new deals. Affected communities win more profits. We make progress decarbonising one of the world’s dirtiest industries (Indonesia, the world’s leading nickel producer, has a carbon footprint up to 6 times the industry average). And the guaranteed supply may even induce climate commitments from other large emitters. Convincing India to ban internal combustion engines becomes a lot easier, for example, if EV battery shortages aren’t an acute risk. The history of essential commodities, especially those pertaining to energy, is heavily arbitrated by governments. The headlines in a decade could be positive ones: a thriving EV manufacturing sector, transatlantic climate goals reached and the fraught geopolitics of oil largely replaced with secure, clean energy. But that depends on Washington and Brussels acting now.  More

TOKYO (Reuters) -Japan’s nominal base salary grew at the fastest pace in 28 years in May, government data showed on Friday, adding fuel to the debate over when the central bank will unwind its ultra-loose monetary stimulus.Global financial markets have been closely watching Japan’s wage data, as Bank of Japan Governor Kazuo Ueda regards pay growth as a key gauge to consider in deliberations about a shift in policy.Regular wages rose 1.8% in May from a year before, labour ministry data showed, the biggest gain since February 1995. The strong base pay growth boosted worker’s total cash earnings, or nominal wages, by 2.5% in May, after a revised 0.8% increase logged in April.”If inflation stabilises around 2% and nominal wages accelerate to 3% to 3.5%, the condition could be set for the BOJ to dismantle monetary easing framework from the Kuroda era,” said Hisashi Yamada, economist and Hosei University professor.Japan’s largest labour organisation Rengo said on Wednesday that major companies had agreed to average pay hikes of 3.58% this year, the highest since 3.9% in 1993.The result of the spring labour talks, known as “shunto”, will be increasingly seen in government wage statistics over the next few months, a labour ministry official said.Still, real wages contracted 1.2% in May, the 14th consecutive month of year-on-year declines, as relentless consumer inflation outstrips nominal pay growth and squeezes households’ buying power. Analysts say the real wages will remain in contraction for the rest of 2023.Separate data on Friday showed Japanese household spending fell 4.0% in May from a year earlier, down for a third month and more than the median market forecast for a 2.4% decline. Spending on a variety of items from food to clothes to transportation were down, the data showed.On a seasonally adjusted month-on-month basis, household spending was down 1.1%, versus an estimated 0.5% gain to mark a fourth month of decline.”The effects of consumer price inflation are becoming more prevalent in the household spending, offsetting the boon to Japan’s consumption from eased coronavirus restrictions,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.In an interview with the Nikkei newspaper published on Friday, BOJ’s Deputy Governor Shinichi Uchida said the central bank must support the economy with easy policy.Taro Saito, executive research fellow at NLI Research Institute, said next year’s spring labour talks are expected to yield wage growth mostly equivalent to this year’s, because of the longer-than-expected price inflation and labour shortage.”But the biggest risk to the scenario is if the economy itself remains robust until next spring, given the wobbly global economic conditions,” he said. More

Tourism minister Daniela Carneiro will be replaced by federal lawmaker Celso Sabino from the Uniao Brasil party, something the fragmented bloc of lawmakers called the ‘Centrao,’ or ‘Big Center’ had demanded in exchange for backing Lula’s initiatives in Congress.The support from Centrao, known more for their horse-trading prowess than ideological commitments, is key to getting passing Lula’s legislative agenda, such as a tax reform bill being voted on Thursday.At least 308 votes are needed in two rounds of voting in the plenary and the support of the Uniao Brasil party, with 59 federal lawmakers, can be decisive for the bill to advance. More

SEOUL (Reuters) -Samsung Electronics Co Ltd reported a likely 96% plunge in second-quarter operating profit on Friday, largely in line with forecasts, as an ongoing chip glut drives large losses in the tech giant’s key business despite a supply cut. The world’s largest memory chip and smartphone maker estimated its operating profit fell to 600 billion won ($459 million) in April to June, from 14.1 trillion won a year earlier in a short preliminary earnings statement. It would be Samsung (KS:005930)’s lowest profit for any quarter since a 590 billion won profit in the first quarter of 2009, according to company data. The profit was largely in line with a 555 billion won Refinitiv SmartEstimate, which is weighted toward forecasts from analysts who are more consistently accurate. Shares in Samsung fell 1.4% in early morning trade, underperforming a 0.6% drop in the wider market. Samsung is due to release detailed earnings on July 27. In the January-March quarter, the company reported a whopping 4.58 trillion won loss in its chip business as memory chip prices fell further and its inventory values were slashed.But in the second quarter, losses in Samsung’s memory chip business likely shrank due to more sales of DRAM chips, used in PCs, mobile phones and servers, analysts said. “Although memory prices fell, the drop was not as large as feared,” said Park Kang-ho, analyst at Daishin Securities.”When full earnings are announced, investors will be looking for third-quarter signals – how much effect the production cut will have in the third quarter, any demand recovery, and whether higher-end DRAM and high bandwidth memory (HBM) products are set to improve (Samsung’s) profit mix.” BOTTOMING OUTThe memory chip downturn that began last year is expected to hit bottom in the third quarter, analysts said, although the rebound may start small. “DRAM memory prices are expected to rebound in earnest from the fourth quarter, and double-digit quarterly increases are expected from the second half of 2024,” said Greg Roh, head of research at Hyundai Motor Securities. “Unlike its competitors, (Samsung) is expected to maintain its investment in memory chips this year … which will pay off in increased market dominance in 2025.” In the mobile business, Samsung is expected to unveil its latest foldable smartphones later this month in Seoul, weeks earlier than usual – seen by analysts as a bid to dominate the premium phone market for longer before rival Apple (NASDAQ:AAPL) releases its next iPhone.However, analyst outlooks for Samsung’s mobile profits in the third quarter were mixed as consumer sentiment in the global smartphone market remained weak, despite some recent recovery in economic indicators. Revenue in April to June likely fell 22% from the same period a year earlier to 60 trillion won, Samsung said in the statement. ($1 = 1,307.6700 won) More

TOKYO (Reuters) -Bank of Japan (BOJ) Deputy Governor Shinichi Uchida said the central bank will maintain its yield curve control policy from the perspective of sustaining ultra-loose monetary conditions, the Nikkei newspaper reported on Friday.”We want to make the decision from the perspective of how to sustain easy monetary conditions, while taking into account (the policy’s) impact on financial intermediation and market function,” Uchida was quoted as saying by Nikkei, when asked about the chance of modifying a cap the BOJ sets on long-term interest rates.With inflation exceeding its 2% target for more than a year, markets are simmering with speculation the BOJ will tweak yield curve control (YCC) – a policy that guides short-term interest rates at -0.1% and caps the 10-year bond yield around 0%.Uchida ruled out the chance of an early end to negative short-term rates, saying any such move would be tantamount to a 0.1% interest rate hike and was inappropriate in light of current economic conditions, according to Nikkei.Introduced in 2016 after years of heavy asset-buying failed to fire up inflation to the BOJ’s 2% target, YCC has drawn criticism from investors for distorting market pricing and eroding financial institutions’ profits with prolonged ultra-low rates.Uchida said the BOJ “strongly acknowledges” the side-effects of YCC such as the impact on market function, according to Nikkei.But the central bank must support the economy amid recent signs of change in corporate wage and price-setting behaviour, Uchida was quoted as saying.”The risk of missing the opportunity to achieve our 2% target with a premature policy shift is bigger than that of being too late in tightening policy and allowing inflation to continue running above 2%,” Uchida told Nikkei. More

TORONTO (Reuters) -The Canadian dock workers strike is another factor for the Bank of Canada (BoC) to consider ahead of its policy announcement next week because the longer it drags on, the greater the risk of supply-chain disruptions that fuel inflation, economists said.Some 7,500 dock workers went on strike on Saturday for higher wages, upending operations at two of Canada’s three busiest ports, the Port of Vancouver and Port of Prince Rupert. The two ports are key gateways for exporting the country’s natural resources and commodities, and for bringing in raw materials.The walkout impacting C$500 million ($374 million) in trade per day, now in its sixth day, could also hurt economic activity, though that is less of a concern for the central bank, especially if overtime work later clears backlogs.”The supply-chain impact and any kind of inflationary pressure is the bigger risk,” said Andrew Grantham, senior economist at CIBC Capital Markets.”If there’s a near-term volatility in the trade figures or even the GDP figures based on this, the Bank of Canada always looks through that volatility no matter where it comes from.”The BoC came off the sidelines in June after a five-month pause, raising interest rates to a 22-year high of 4.75%, blaming stronger-than-expected growth and a tight labour market for stubbornly high inflation.Inflation was 3.4% in May, the latest data show, down from a peak of 8.1% last year, but the BoC has said it will take until the end of next year to get it all the way down to its 2% target.Money markets expect the central bank to tighten further, possibly as soon as at a policy decision next Wednesday. Most economists surveyed by Reuters are convinced there will be another rate hike next week. Canada’s federal and provincial governments have been urging the parties to restart talks after they broke down on Tuesday.”Industry, labour, and all levels of government want to see goods moving through our BC ports,” Canada’s minister of labour, Seamus O’Regan, said in a statement posted on Twitter on Thursday.O’Regan said he spoke with Acting U.S. Secretary of Labor Julie Su on Thursday afternoon. Around two-thirds of Canada’s total global trade is with the U.S., according to the federal government website. The Canadian Manufacturers & Exporters (CM&E) industry body said the strike is disrupting C$500 million in trade every day. “This is a serious disruption that will have some noticeable consequences if it drags on,” Robert Kavcic, senior economist at BMO Capital Markets, said in a note.($1 = 1.3360 Canadian dollars) More