Here’s what another Bank of Canada rate hike means for Canadians
By Tara Deschamps in Toronto
The Bank of Canada hiked its key interest rate by a quarter of a percentage point Wednesday, bringing it to 4.5 per cent — the highest it’s been since 2007.
The increase marks the eighth consecutive rate hike since the central bank began raising from near-zero in March.
The Bank of Canada said Wednesday that it expects this to be the last rate hike of the cycle.
The rate hikes are intended to reduce stubbornly high inflation, which peaked over the summer and has been steadily declining since, but many economists feel the shock to the economy could lead to a recession.
Here’s a look at what the rate means, how analysts are interpreting it and what it could mean for consumers.
What is the key policy rate and what does it do?
The key policy rate, also known as the target for the overnight rate, is how much interest the Bank of Canada wants commercial banks to charge when lending each other money overnight to settle daily balances.
Knowing how much it costs to lend money, or to deposit it with the central bank, helps set the interest rates charged on things like loans and mortgages.
Lowering the rate generally makes borrowing money more affordable, while raising it makes such activities more expensive.
Why is the bank using the rate to target inflation?
Inflation is a measure of how much the prices of goods and services are rising or falling. High inflation is a sign of an economy that’s overheating.
Canada’s annual inflation rate reached a peak of 8.1 per cent in June, the highest level in four decades.
It has eased since then, reaching 6.8 per cent in November and 6.3 per cent in December. And shoppers have seen even higher price increases for common expenses like groceries. Grocery prices have been rising at the fastest pace in decades and were 11 per cent higher in December than they were a year ago.
Economists and the central bank want to see a further easing of inflation, which is why interest rates have been rising so quickly in the hope of cooling consumer spending patterns.
“Inflation is still too high and short-term inflation expectations remain elevated,” the bank said in its most recent announcement. “The longer that consumers and businesses expect inflation to be above the target, the greater the risk that elevated inflation becomes entrenched.”
What does this mean for my mortgage?
Mortgage rates tend to increase or decrease in tandem with interest rates.
When Canadians buy homes there are two kinds of mortgages they can select — fixed rate or variable. Fixed-rate mortgages allow borrowers to lock in the interest rate they will pay for a set amount of time, while variable-rate mortgages can fluctuate.
After the Bank of Canada’s rate hike on Wednesday, prime rates can be expected to rise to 6.7 per cent and variable rates will be set at about 5.75 per cent and above, said Leah Zlatkin, a mortgage broker with LowestRates.ca.
Assuming their mortgage has a 25-year amortization and they had a 15 per cent down payment, she said a homeowner with a variable mortgage rate of 5.45 per cent on a home priced at $700,000 will have a monthly mortgage payment of around $3,716.
The same mortgage at 5.7 per cent will see monthly mortgage payments increase to about $3,805, a $89 jump per month, she added.
“This will put greater pressure on an already struggling housing market,” Zlatkin said in a news release.
“For homeowners in Ontario who are seeing increased property taxes in addition to rate hikes, it’s likely this will be the worst squeeze homeowners have felt yet.”
This report by The Canadian Press was first published Jan. 25, 2022.
China’s global influence looms over Harris trip to Africa
U.S. Vice President Kamala Harris, left, is greeted by Zambian President Hakainde Hichilema in Lusaka, Zambia, Friday March 31, 2023. Harris is on the last leg of a a seven-day African visit that took her to Ghana and Tanzania. (AP Photo/Salim Dawood)
By Chris Megerian, Cara Anna And Andrew Meldrum in Lusaka
LUSAKA, Zambia (AP) — When Vice President Kamala Harris arrived in Zambia on Friday for the final stop of her weeklong trip across Africa, she touched down at an airport that’s doubled in size and features glittering new terminals.
Rather than a symbol of promising local development, it’s a reminder of China’s deep influence. Beijing financed the project, one of many that has expanded its footprint on a booming continent that’s rich in natural resources, often generating goodwill among its citizens.
The global rivalry between the United States and China has been a recurring backdrop for Harris’ journey, and nowhere has that been more apparent than Zambia and her previous stop in Tanzania.
Besides the airport, China built a 60,000-seat stadium in Lusaka, plus roads and bridges around the country. Zambia is on the hook for all of the development with billions of dollars in debt. Tanzania is a major trading partner with China, and it has a new political leadership school funded by the Chinese Communist Party.
The developments have alarmed Washington, and President Joe Biden’s administration is worried that Africa is slipping further into Beijing’s sphere of influence.
Harris has played down the issue on her trip, preferring to focus on building partnerships independent of geopolitical competition. However, she has acknowledged there’s limited time for the U.S. to make inroads on the continent, telling reporters earlier in the trip that there is a “window” that is “definitely open now” for American investments.
At a news conference with Zambian President Hakainde Hichilema on Friday, Harris reiterated her call for “all bilateral official creditors to provide a meaningful debt reduction for Zambia” — an oblique reference to China — but she stressed that “our presence here is not about China.”
Hichilema said it would be “completely wrong” to view Zambia’s interests in terms of a rivalry between the U.S. and China.
“When I’m in Washington, I’m not against Beijing. When I’m in Beijing, I’m not against Washington,” he said, adding that “none of these relationships are about working against someone or a group of countries.”
China’s roots in both Tanzania and Zambia run deep. In the 1970s, Beijing built the Tazara Railway from landlocked Zambia to Tanzania’s Dar es Salaam port, allowing copper exports to circumvent white-minority-ruled Rhodesia and apartheid South Africa.
Today, China is Africa’s largest two-way trading partner, with $254 billion of business in 2021, according to the United States Institute of Peace. That’s four times the amount of trade between the U.S. and Africa. In addition, dealing with Beijing features less admonishments about democracy than with Washington.
“Most African countries are rightly unapologetic about their close ties to China,” Nigeria’s vice president, Yemi Osinbajo, tweeted on Thursday. “China shows up where and when the West will not and/or are reluctant.”
Sen. Chris Coons, a Delaware Democrat who has worked on Africa issues in Congress, expressed frustration over China’s growing influence on the continent.
“We switched from being the No. 1 trade partner or the No. 1 investment partner in two dozen countries, to China being the No. 1 trade and investment partner,” he told reporters aboard Air Force Two on the flight to Ghana at the beginning of Harris’ trip. “I think our challenge for this decade is to address that.”
Biden has been taking steps toward that, such as hosting a summit for African leaders in December, when he announced that he wants to commit $55 billion to the continent in the coming years.
Harris has made announcements as well during her trip, including more than $1 billion in public and private money for economic development, $100 million for security assistance in West Africa and $500 million to facilitate trade with Tanzania.
However, there’s skepticism about whether the U.S. will follow through on its promises, and Harris has been faced with not-so-subtle hints that Africa expects more. For example, the presidents of Ghana and Tanzania bluntly said they hope Biden chooses to visit their countries during his expected trip to Africa later this year, which would be his first to the continent as president.
By comparison, Tanzania was among the first countries that Chinese President Xi Jinping visited after becoming president in 2013. And after Xi secured a third term, Tanzanian President Samia Suluhu Hassan was the first African head of state to visit Beijing.
“Kamala faces Chinese dominance in Tanzania,” the Tanzania Business Insight publication tweeted Wednesday.
Ian Johnson, a former China-based journalist who works at the U.S.-based Council on Foreign Relations, said Beijing presents a powerful narrative in the developing world as a country that rapidly built its economy and pulled much of its population out of poverty.
African leaders think “let’s see what we can learn from China,” he said, adding that “there’s a certain fascination in how they did it.”
Johnson also said China views Africa differently than the U.S.
“We have a tendency to see Africa as a series of problems — wars, famines, something like that,” he said. “But in China’s eyes, Africa is much more of an opportunity.”
Edem Selormey, who conducts public opinion research at the Ghana Center for Democratic Development, said the feeling is often mutual.
“China’s influence in Africa is largely seen as positive,” she said. “And the U.S. trails China in that regard.”
The difference, she said, is often about “what citizens see on the ground,” such as infrastructure projects, and “the U.S. has been missing from this picture for a while.”
John Kirby, a White House national security spokesman, said the debt that comes from China’s involvement is ultimately corrosive. He said African leaders are “beginning to realize that China is not really their friend.”
“China’s interests in the region are purely selfish, as opposed to the United States,” he said.
It’s a sentiment that draws scoffs in some corners of Africa.
“America is like playing the role of a big Uncle Sam in trying to defend African countries against what they think is the encroachment of China into the liberty of African countries through these loans,” said Tanzania-based analyst Mohamed Issa Hemed.
However, he added, “China is ahead of the U.S. in many, many ways.”
Daniel Russel, a former State Department official who is now at the Asia Society Policy Institute, summed up the African perspective as “enough with the lectures” about China. “They’ve got something we want. And they’ve got it right here.”
When it comes to U.S. hopes for Africa, he said, ”you can’t beat something with nothing.”
___ Anna reported from Nairobi, Kenya, and Meldrum from Johannesburg. Associated Press writer Evelyne Musambi in Nairobi, Kenya, contributed to this report.
WestJet pilots to launch strike authorization vote as negotiations fizzle
Members of the Air Line Pilots Association demonstrate amid contract negotiations outside Westjet’s headquarters in Calgary, Alta., Friday, March 31, 2023. THE CANADIAN PRESS/Jeff McIntosh
By Christopher Reynolds in Montreal
The union representing WestJet pilots will launch a strike authorization vote Monday as contract talks with management drag on, the Air Line Pilots Association said Friday.
Bernard Lewall, who heads ALPA Canada’s WestJet contingent, said its 1,600-person membership is “frustrated” after six months of bargaining with a company he claims has failed to seriously engage with it.
The issues revolve around wages, scheduling and work conditions at WestJet and its discount subsidiary Swoop, with 39 pilots opting to leave for other airlines in the past month alone, Lewall said in a phone interview from Calgary.
“WestJet used to be a place where young pilots wanted to come and work. That’s not the case anymore. It’s not just more experienced pilots that are leaving; you have new pilots looking at other places to fly too,” he said, ahead of a union demonstration at WestJet headquarters at the Calgary airport.
“We want to show that the company has to treat its pilots better.”
WestJet said the threat of a strike is a “common and expected tactic” in the negotiation process.
“However, that does not mean a strike will occur. WestJet is committed to this process and will continue to work with ALPA to reach a collective agreement that provides value to our current and future pilots, is sustainable for the company and avoids disruption to our guests,” spokeswoman Madison Kruger said in an email.
Lewall said their wages remain well below the North American industry standard. Meanwhile, pilots are being asked to spend more time away from home. “We’re already away from our families half the month.”
If successful, the 15-day authorization vote would set the stage for the bargaining team to call a strike following a three-week “cooling-off period,” which in turn would begin after the ongoing federal conciliation process wraps up April 24.
That means the union could go on strike or lockout by the May long weekend, which traditionally kicks off the summer travel season.
The strike mandate vote comes amid a severe pilot shortage as airlines struggle to shore up bottom lines badly dented by the pandemic.
One stumbling block is “equal pay for equal work,” said Lewall.
Currently, pilots who fly under the Swoop banner are paid less than those who fly for WestJet. With the company’s takeover of leisure carrier Sunwing approved by the federal government on March 10, Lewall said the union is worried it could lead to the creation of yet another class of pilots with a different pay scale.
“We could find ourselves in a place where there would be three airlines basically within WestJet who are all operating the same aircraft for different wages and with different conditions,” he said.
Proposed last March, the Sunwing acquisition will see Calgary-based WestJet bolster its vacation package offerings as it adds the tour operator to its fleet, though the two brands will be marketed separately.
Poised for completion in the next few weeks, the takeover marks a major consolidation of the Canadian aviation market following a tumultuous year for travel.
WestJet pilots first unionized in May 2017, signalling a major shift in culture at the famously non-union airline.
Since then, other employee groups at the company have also unionized, including flight attendants and certain airport employees.
The pilots’ first union contract, which expired at the end of last year, was the result of an arbitrated settlement reached in 2018. That deal averted a threatened strike, as WestJet pilots had voted in favour of job action after contract talks fell apart.
This report by The Canadian Press was first published March 31, 2023.
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