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MNI INTERVIEW: Right-Wing Spanish Gov't To Cut Spending, Debt
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The Bank of Japan is likely to harden its language around its pre-emptive approach to monetary policy to more align with global central banking norms to stabilise underlying CPI inflation at about 2%, as it grapples with inflationary government spending and a persistently weaker yen, former BOJ board member Makoto Sakurai told MNI.
While Prime Minister Sanae Takaichi's government has likely accepted the 1.25% policy rate will need to rise further, it has not limited its often contradictory fiscal policies, he said, pointing to the recent passing of a consumption tax cut bill. The government's fiscal expansion will continue to weaken the yen, with further BOJ rate hikes only slowing its decline, Sakurai argued. The BOJ is likely to reiterate its position in future that it will act pre-emptively, or in an emergency, based on the outlook for the economy and price developments, Sakurai said, noting that several peer central banks had recently used similar language.
He maintained his view that the BOJ would raise its policy rate to 1.5% in December and continue hiking at roughly three-month intervals until it reaches his estimated terminal rate of 2%. (See MNI INTERVIEW: Ex-BOJ Sakurai Sees Dec Hike, 2% Terminal Rate) The Board is likely to take a wait-and-see attitude in or after mid-2027 after raising the rate to 2%, depending on price moves. “Should the inflation rate accelerate, raising the policy rate above 2% would be necessary, but such a rate hike may be resisted by the government or public,” he continued, adding the government would likely accept a 2% rate.
Markets see the policy rate peaking at 1.8% by September 2027, with a 75% chance of a hike priced in for the December meeting.
FUTURE INFLATION
“The BOJ made it clear that underlying CPI inflation has reached its 2% target, and the bank must pay attention to both acceleration and deceleration in inflation,” Sakurai said. He noted that the BOJ had returned to a more conventional inflation-targeting stance, rather than simply seeking higher inflation, and would now focus on conducting monetary policy to prevent unusual or unnecessary price movements, guided by its commitment to the 2% inflation target.
FINANCIAL CONDITIONS
Sakurai said financial conditions varied between large and smaller firms, making it difficult for the BOJ to assess the overall degree of monetary accommodation.
While financial conditions remained accommodative at the macro level, the BOJ must gather information at the micro level and assess whether tighter conditions were weighing on economic growth, he added.
Pointing to falling property prices, he warned some real-estate firms were struggling with high borrowing costs on "revolving" rates rather than fixed-rate loans, prompting some to sell properties to repay debt. Real-estate firms accounted for around 30-40% of total lending by small financial institutions, exposing those lenders to potential unrealised losses and rising credit risks that could undermine financial system stability, he warned.
The BOJ was paying closer attention to the effects of higher borrowing costs on businesses and the financial system. If the Bank was slow to respond, it would increase the risk of a bubble bursting, Sakurai concluded.
Nov-10 07:39
The Reserve Bank of Australia has likely reached the peak of its tightening cycle, although how long the cash rate remains at 4.85% will depend on the impact of higher borrowing costs on the real economy and whether further supply shocks emerge, prominent economists told MNI.
The current level of the rate is highly restrictive and will increasingly weigh on the economy over the next 12 months, particularly as unemployment rises, said former RBA economist Martin Eftimoski.
Eftimoski, who worked at the RBA from 2017 to 2021, believed the Bank should have held at 4.6% last week. The RBA's communication has become too focused on academic and market commentary rather than explaining the pressures facing Australian households and businesses, he added, noting the Bank had based its decision too much on models and not enough on the real economy. (See MNI RBA WATCH: Bullock Points To Dual Mandate Following Hike)
“There's a lot of people in their ears about monetary policy, and they've pivoted so hard away from the anecdotal world,” Eftimoski added. “In the process they've actually gone too hard into that world of abstract theoretical construction, and I think they're missing the high-dimensional complexity of their task. These models that they build, they're just approximations."
He questioned how the RBA would respond if the federal government adopted a more expansionary fiscal stance ahead of the 2028 election, arguing that political pressure for stimulus could complicate the Bank's efforts to contain inflation, while its ability to hike further to counter higher government spending will be limited due to the already restrictive level of the cash rate.
Eftimoski also cautioned against assuming a particular path for interest rates, given the uncertainty surrounding global bond yields, oil prices and developments in the Persian Gulf, pointing to Governor Michele Bullock's comments last week that the direction of the cash rate was unknown and would rely on data. While he sees little chance of a further hike, inflation has now been above the Bank's target for about six years and an additional supply shock that pushes price rises higher could leave the bank with little choice but to act to maintain its creditability and contain inflation expectations, he added.
PEAK RATE
James Morley, professor of macroeconomics at the University of Sydney, agreed with the RBA's decision to raise rates but doubted further tightening would be necessary under current circumstances.
Morley said the Bank was right to prioritise the risk of entrenched inflation expectations, given that inflation was running higher in Australia than in some other countries and reflected, in part, domestic pressures. However, rising unemployment, falling house prices and the delayed effects of previous rate increases could provide sufficient restraint on demand to bring inflation lower without further tightening.
Morley said it would take a significant upside inflation surprise in the new year to convince him that the RBA needed to raise rates again. He also noted that the RBA had acknowledged the possibility that its tightening cycle could lead to a recession, although this was not necessarily its central expectation.
"There's a sense that these policy moves will have an impact on the real economy. The question is how much. The long and variable lags of monetary policy are always a bit uncertain and it interacts with other developments like those in the global economy. We've already seen big drops in house prices and that traditionally will have an affect via the wealth channel on spending."
Unemployment is likely to rise further, he said, pointing to the RBA's 5.1% unemployment projection by Dec 2028, although whether growth slows fast enough to push unemployment sharply higher would depend on other developments, including global conditions and consumer spending strength.
Morley pushed back against the notion that the RBA had become too dependent on its models, noting it appeared to be placing greater emphasis on actual inflation outcomes rather than relying as heavily on forecasts, reflecting the recent deterioration in both headline and underlying price measures. The shift also reflected the Bank's desire to demonstrate its commitment to bringing inflation back within its 2-3% target range and keeping longer-term expectations anchored, he concluded.
Nov-10 02:17
European Economy Commissioner Valdis Dombrovskis signalled to euro area finance ministers on Monday that he is ready to get tough on enforcing the EU's fiscal rules as bond markets turn volatile, MNI understands.
The commissioner told the ministers that he will be sending out letters to some countries as they prepare their 2027 draft budget plans warning they are at risk of non-compliance with the spending paths to which they are committed in their medium-term fiscal structural plans. He did not name the states in question.
The comments reflect growing concern among EU officials over recent bond market volatility as well as the persistently high level of level of public debt in some countries.
Dombrovskis also noted during the meeting that some countries might face steps under the Excessive Deficit Procedure for failure to comply with their 2026 budget commitments.
The Commission is due to issue its Autumn Package, a key annual milestone in its surveillance of states' fiscal policies, on Nov 24 following next week's autumn economic forecasts. The commissioner hinted today that there will be a slight upward revision to 2026 euro area growth in the estimates.
Earlier on Monday EU finance ministers approved the National Escape Clause for Italy allowing it flexibility under the fiscal rules for defence spending and energy measures up to 0.6% of GDP. Rome believes that granting the NEC is a nod to the country’s compromise of closing its 2026 deficit below 3% of GDP, allowing an exit of the Excessive Deficit Procedure while activating the NEC. (See MNI: Meloni Tax Cuts Depend On EU Flexibility -Sources )
Nov-09 16:40
Canada's central bank will raise interest rates for a second meeting next month and again by March, with official comments about moving cautiously aimed at preventing market over reactions rather than being motivated by any risk that inflation quickly settles down, a former finance department official told MNI.
“They aren’t put in a box, but they’ve set themselves pretty clearly on a path to do it in December, otherwise there’s something that’s not consistent in his thinking,” said Dominique Lapointe, now director of macro strategy at Manulife in Montreal. “They mentioned being cautious because they didn’t want markets to integrate so many rate hikes.”
Investors earlier this year priced in three rate hikes for 2026 and speculation has been volatile since Governor Tiff Macklem hiked the policy rate for the first time in more than three years. Macklem also boosted the 2027 inflation forecast to 3.1% from 2% and said the Iran war means more Canadian firms will start passing on cost increases.
That's a medium-term view and will remain in place even if the next inflation report Nov 16 is weak, Lapointe said. “They are thinking inflation is going to stay higher for longer-- 3% next year, that’s a strong forecast. And I think crucially they don’t see an end to the conflict.”
The main question as to whether another hike will come in January or March is whether Mark Carney and Donald Trump resolve the tariffs dispute, Lapointe said. “They are going to raise rates in December and then they are going to do it in January if we have a deal with the U.S. If we don’t then they are going to do it in March.”
OIL WINDFALL
The Governor told MNI earlier this year his focus is inflation even if there's a trade-off against growth. He told lawmakers last week growth was still set to coming in around 2% annualized in the third quarter after flash GDP figures showed it closer to 1%. (See: MNI INTERVIEW: Macklem-BOC Faces Tough Calls Ahead On Rates)
The Bank sees growth rebounding to 2% next year and points to domestic energy producers benefitting from higher prices, exporters’ resilience in the face of tariffs and more government spending to spur investment. “Their thinking is that higher oil is good for Canada,” Lapointe said.
Carney is also seeing an energy windfall, and his budget Thursday focused on corporate tax cuts that will squeeze federal finances if there's another global shock before big projects pay off, he said.
“There isn’t a lot of room to maneuver in a very uncertain global economic picture,” Lapointe says. Downside risks include tariffs, problems in the AI industry, and tighter global financial conditions including bond yields, he said.
WEAK FISCAL ANCHORS
“The deficit could easily go back to a hundred billion in a dire economic situation. That is not our base case, but it could happen, and we’re in a global bond market,” he said. (See MNI INTERVIEW: Canada Heading Back To 1990s Debt Wall- Ragan)
Thursday's budget showed the deficit for the fiscal year ending in March at CAD62.3 billion or 1.8% of GDP. It also indicated no progress in lowering debt as a percentage of GDP until the middle of the next decade.
“It used to be the goal, the anchor, was that it’s declining, let alone balancing the budget. Now it’s not,” Lapointe said.
That weakens arguments from ministers about strength relative to G7 peers on measures like net debt, Lapointe said, while more foreign buying of Canadian bonds in recent years amplifies risk.
Nov-09 15:25
A stronger-than-expected October U.S. payrolls report remains consistent with a “quiet steady state” labor market that's not heating up in a manner that threatens to add to the Federal Reserve's inflation problem, Princeton University economist Aysegul Sahin, an adviser to the Federal Reserve Banks of Dallas and New York and the Congressional Budget Office, told MNI.
She characterized October's 165,000 payroll gain, against Wall Street expectations for 65,000, and dip in the unemployment rate by a tenth to 4.1% as normal month-to-month volatility rather than signs the market is tightening. Over the past 12 months, job gains averaged roughly 74,000 a month, which closely aligns with her estimated breakeven pace of 40,000 to 80,000.
"The labor market is in a quiet steady state. It’s quiet in the sense that there’s not too much movement around. My estimate of the secular trend of unemployment is and has been for a while 4.1%. This is what’s implied by structural factors and demographics, thinking of a neutral labor market -- and we are there."
Layoffs and initial claims for jobless benefits remain very low, despite higher borrowing costs as the Fed raises interest rates, she said.
"The expectation of tightening is not big enough to push the labor market into a visibly weaker stance."
WAGE GROWTH
The low-hire, low-fire pattern is to be expected following a post-Covid reallocation boom that has run its course, Sahin said. After putting upward pressure on inflation during that time, wage growth has cooled and is now unlikely to be an inflation risk.
"This disconnect between inflation and the labor market is, in a way, good," she said. "It gives some room to the Fed to do this more-or-less symbolic tightening."
Symbolic, she said, because the rate hikes do not appear to be materially tightening financial conditions, while the Fed, having "been burned with the transitory stuff," is reluctant to call the oil and tariff shocks temporary and keen to show it will act to bring inflation back to target.
Wage growth may actually be a bit stronger than headline figures suggest, she said. In a strengthening labor market, composition effects drag down top line averages as lower-wage workers enter the job market and high-wage baby boomers retire. Average hourly earnings rose 3.1% in the 12 months through October after increasing 3.2% in September.
"Wage growth is not that weak, but it’s not strong enough to create this idea that wage pressures will make the firms increase prices," she said.
AI
AI is the biggest source of uncertainty for the labor market over the medium term, Sahin said. Part of the hiring reluctance reflects heavy AI investment, with firms holding wage bills flat because labor costs are the most visible margin to control.
That weak hiring falls more on fresh graduates and other new entrants, who now face longer unemployment spells, though Sahin said their small labor force share limits the impact on how policymakers think about full employment.
The key question for Fed Chairman Kevin Warsh’s AI productivity task force, which holds a Bay Area field hearing later this month, is how quickly productivity gains arrive. The technology has not yet fundamentally changed the way goods and services are produced across the broader economy, but bottlenecks in IT equipment, electricity and water supply in the data center build-out are creating price pressures from the demand side and may warrant higher rates. (See MNI INTERVIEW: Hot Economy To Keep Fed Hiking - Andolfatto)
"That’s the difficulty for the Fed to understand: there's this huge investment boom, there's a lot of leverage in the economy, but if the productivity gains are not coming soon, how should we think about this?"
A collapse is possible from overvalued markets, an investment pullback or financial strains, but “it’s not going to start in the labor market,” according to Sahin.
Nov-09 14:01
Beijing should address fiscal bottlenecks that have limited policy effectiveness this year, while accelerating expenditure and channelling more support to households to bolster the economy in 2027 as export growth is expected to moderate, an economic expert told MNI.
Authorities could modestly increase the deficit to about CNY6.2 trillion next year from CNY5.89 trillion in 2026, while raising the local government special-purpose bond quota by about CNY100 billion to CNY4.5 trillion to support the economy, said Ding Yifan, former deputy director of the institute of world development, under the development research centre of the State Council.
However, the effectiveness of additional fiscal support would depend more on faster deployment of funds, easing constraints on local government spending and directing more resources towards households than on the headline size of the deficit, he argued. (See MNI EM INTERVIEW: China's Trade Competitiveness To Hold In 2027)
"The problem this year has been less about the size of the fiscal envelope than about where and how fast the money is spent," Ding said.
Sharing his own personal views with MNI, Ding noted in the first five months of 2026 general public budget expenditure rose just 0.8% year-on-year, while government fund budget spending fell 4.3%, compared with annual budgeted growth of 4.4% and 5.1%, respectively. The shortfall relative to budgeted growth was the largest for the corresponding period in five years, he said.
Ding, who is also vice president of the China Society of World Economics, attributed the weakness chiefly to local-level execution rather than revenue shortages, noting tax receipts had grown faster than budgeted early in the year. Local officials had become more cautious about approving projects partly because of a lifetime accountability system for government investment decisions introduced in 2026 and a shift away from investment-led performance assessments, he said.
Requirements linking special-purpose bond funding to eligible projects also slowed expenditure as project pipelines developed in the first year of the 15th Five-Year Plan, he added.
Ding suggested Beijing allocate more of next year's bond quotas and fiscal transfers early, establish quarterly spending benchmarks and clarify accountability rules to protect officials whose officially approved projects subsequently underperform. "The 2026 experience shows that a headline fiscal stance can be undermined by slow disbursement," he added.
HOUSEHOLD SUPPORT
Ding expects Beijing to introduce a more concrete household income-growth plan next year, shift incremental fiscal resources towards transfers and social spending, and continue targeted investment in transport, energy and other infrastructure networks.
Those projects could generate about CNY1 trillion in additional investment, or roughly 0.7% of GDP, but would not offset weakness in property and local government investment on their own, he said.
A larger programme of direct household transfers involving around CNY2 trillion in additional fiscal expansion remained possible, but would likely require a sharper deterioration in external demand and the labour market, Ding added. The central government had more fiscal capacity than local authorities and could increase transfers to fund household support, he added.
Authorities should prioritise fiscal transfers to low- and middle-income households, stronger social security and services consumption over broad infrastructure stimulus and consumer goods trade-in subsidies, Ding said, noting trade-in programmes had already brought forward demand and would create a high comparison base in 2027.
The ratio of per-capita consumption to disposable income fell to 67.1% in the third quarter of 2026 from 68.7% in mid-2024 and around 70% before the pandemic, reflecting weak incomes and precautionary saving, Ding noted.
EXPORTS
The need for more effective fiscal support could become more pressing as China's export growth moderates in 2027, Ding said. (See: MNI EM: Yuan To Strengthen Further Despite PBOC Warning Shot)
Global demand for AI-related infrastructure, including servers, semiconductors and data-centre equipment, has supported Chinese exports this year, but its contribution could weaken as the global investment cycle matures, he noted.
"For 2027, I would expect the contribution from AI-related demand to moderate, but not necessarily to collapse," he said.
Exports of green technologies, intermediate goods and consumer products, along with shipments to emerging markets, could cushion the slowdown but might not fully replace AI-related demand if it fell sharply.
"Overall, I see export growth as likely to remain positive but to become more dependent on non-AI sectors and more exposed to external demand and trade-policy risks," Ding said.
Nov-09 06:03
China's export growth will likely slow moderately in 2027 from this year's high base, with expansion potentially remaining in the high single-digit to low double-digit range, as sustained global demand for artificial intelligence hardware supports shipments despite a possible price correction, a policy advisor to the Ministry of Commerce told MNI.
“It is unlikely that the export performance of the AI supply chain will see a simultaneous decline in both volume and price, as market demand remains quite strong, given that the technology is still developing rapidly,” said Zhang Jianping, deputy director of the Academic Committee at the MOFCOM-affiliated Chinese Academy of International Trade and Economic Cooperation.
However, slowing overseas AI-related capital expenditure and easing price gains for memory products next year will likely moderate export growth following a 21.3% year-on-year increase in the first three quarters, he added. Zhang expects AI-related shipments to maintain stable volumes but face declining prices, with AI-related exports approaching a cyclical peak while conventional mechanical and electrical goods and new-energy products underpin overall export growth.
Rising prices and a greater share of high-value-added products have driven much of this year's AI-related export boom, Zhang explained. A CICC report estimated that higher prices accounted for about two-thirds of the expansion in China's trade surplus in the third quarter.
GDP CONTRIBUTION
Zhang expects net exports to remain one of the key drivers of GDP growth this year, contributing 10-20% of economic expansion, easing from 33% in 2025. “As the yuan appreciates, China is seeing an expansion in imports and a rise in the price base, which will, to some extent, reduce the incremental growth of net exports,” Zhang said.
Strong AI-related exports also fuel demand for imported chips, components and parts, limiting their contribution to domestic value-added because of the sector's reliance on processing trade, he noted.
China's AI-related exports surged 56.8% year-on-year in the first three quarters, while imports of related products jumped 58.3%, according to CICC.
TRADE PARTNERS
Zhang expects China-U.S. relations to remain relatively stable and predictable heading into next year, supported by leader-level diplomacy.
The current tariff truce runs until next year, while a reciprocal tariff-reduction framework has lowered duties on a broad range of products to most-favoured-nation rates, covering USD30 billion in bilateral trade, he noted. However, EU restrictions on hybrid-vehicle imports could constrain China's near-term efforts to expand its share of the global automotive market, although their impact on overall export growth should remain limited, given the rapidly growing competitiveness of Chinese automakers, Zhang warned. (See MNI INTERVIEW: Chinese Automakers Eye Gradual EU Production)
China remains willing to resolve trade disputes with the EU through negotiations under the World Trade Organization framework, he said. “China’s stance is to avoid proactively escalating the confrontation, while firmly rejecting any attempts to secure concessions through exerting pressure,” Zhang continued.
Beijing retains a broad range of potential countermeasures, including higher tariffs on selected imports, non-tariff measures, export controls on dual-use goods, regulations against improper extraterritorial application of foreign laws and dispute-settlement proceedings at the WTO, he added. (See MNI: China Would Consider More EU Export Cap Requests-Advisors)
Nov-09 04:52
The removal from its new five-year mandate of language allowing the Bank of Canada to seek maximum employment at times when inflation is under control undoes a previous mis-step and should improve performance at a time of stubborn prices, some former advisors told MNI.
"Coming out of the Covid recession, this was one of the things that led the Bank to delay raising its policy rate as it waited for the labour market to recover a bit more. I'm sure it views that as a mistake," said Angelo Melino, an economics professor at the University of Toronto and a former central bank advisor.
The mandate agreed with the government and published on the Bank's website after the release of Canada’s fiscal plan on Thursday was much shorter than the equivalent announcement five years ago, and made only passing reference to the job market while stressing low and stable inflation as the best contribution monetary policy can provide.
MNI reported in September that a staff memo prepared for Finance Minister Francois-Philippe Champagne before meeting with Governor Tiff Macklem about the mandate renewal nudged him to ask more about inflation and supply shocks than jobs language. (See MNI: FinMin's BOC Mandate Memo Lists CPI More Than Jobs Goal)
BACK TO BASICS
The previous mandate contained much longer written commentary on the Bank's remit and references to using monetary policy flexibility to support more jobs when inflation is under control. At that time Macklem and then Finance Minister Chrystia Freeland maintained the job language only affirmed flexibility the Bank already had, but economists were skeptical and since then some have said it was a distraction.
“It was a very unclear document” last time, said Chris Ragan, a former Bank visiting scholar and a former McGill University professor. The Bank needs to go “back to basics” of inflation targeting, he said.
Inflation at the time was on its way to a peak of 8.1% in June 2022, which would prompt the BOC to hike its policy rate from near zero to 5%, and Macklem told a joint press conference with Freeland there was little reason to think monetary policy would be swayed towards job aspirations.
"Inflation did get out of control starting in 2021, but most central banks made the same mistake the Bank of Canada did," said former Bank adviser Steve Ambler. Policymakers globally have expressed regret at their slowness in realizing that the end of Covid lockdowns would drive up prices.
After cutting rates to 2.25% last year to support the economy through a tariff dispute with the U.S., Macklem last week hiked to 2.5% and said he's cautiously looking at more to prevent high oil prices from creating widespread inflation.
SIMPLEST FRAMEWORK POSSIBLE
The governor has also said in recent days there's some slack in the job market and the economy more generally, but the inflation target is the first priority. Macklem told MNI in September that inflation must be his first focus even if there was a painful tradeoff against slower growth.
Ambler and others suggested jobs language in the mandate was benign or allowed latitude for the Bank to keep a proper focus on inflation, though none saw it providing major benefits.
"The wording change implemented five years ago has arguably never really been relevant to Canada’s monetary policy since it was added, so it remains untested," said Pedro Antunes, a former central bank forecaster now at Signal49. The language was "ambiguous enough to avoid needing to take it out," he said.
Fred Mc Mahon thought keeping the job language would have been acceptable because it was clear controlling inflation was the prime objective. The former Quebec finance ministry official who's met with Bank staff also said he favors a clear mandate.
"The Bank should aim for the simplest framework possible and conduct an audit of its communications, so that it guides markets only when and where doing so supports financial stability or its mandate of keeping realized and expected inflation close to target," he said. (See MNI TRANSCRIPT: Interview With Bank of Canada Governor Macklem)
Nov-06 15:39
Mark Carney's budget focused on what he calls the biggest infrastructure boom since World War II to fend off U.S. tariffs is undermined by the lack of a corresponding plan to supply workers needed to build projects, a government business adviser told MNI.
"It's only moderately achievable unless they really think more about how to broaden the scope of filling those gaps," according to Corinne Pohlmann, who manages legislative outreach and economic research for the Canadian Federation of Independent Business.
Slower growth brought on by the tariffs masks that some industries are struggling to find staff in skilled trades like welding, she said.
"The skilled trades is a definite area where we're going to see a lot of departures in the next few years," she said in an interview. The average worker in some trades is 50 years old, she said.
POCKETS OF SHORTAGES
The budget presented Thursday outlined tens of billions of dollars a year to support dozens of projects set to be fast-tracked for construction to begin in the next year. Carney wants to double non-U.S. exports over the next decade to break economic dependence on Canada's southern neighbor, and build enough homes to end homelessness.
"We all support the idea of these bigger projects to get them off the ground," she said. "But you need the people to do it." (MNI: Canada Needs Bigger Push Than Commodity Boom-Ex-Ministers)
Earlier Thursday Bank of Canada Governor Tiff Macklem told lawmakers there are "pockets" of industries lacking skilled workers even with slack in the overall job market. The economy is picking up with exporters adapting to tariffs and deficit spending aimed at boosting investment, he told lawmakers this week.
Canada's jobless rate was 5.5% before the pandemic struck and is 6.5% today. It's still closer to a peak of 7.1% after the pandemic eased.
BIDDING UP WAGES?
Labor shortages are cited in surveys of CFIB's 103,000 members as the second-biggest obstacle after energy costs. The third item on the list is wages, which will be bid up alongside an economic rebound and building boom, she said.
"Wages are going up because they (employers) know that in order attract the people that you need, that's what you need to do," she said. "But there's a ceiling to that, there's a point when you become un-competitive."
The budget also laid out a plan to keep cutting immigration targets in coming years. That makes it difficult for Canadian employers in remote locations because it can be hard to find domestic workers willing to relocate, Pohlmann said. Many of Canada's biggest new projects are in rural Canada.
“Some of the reductions in the immigration system and the temporary foreign worker program have had an impact on employers,” she said.
The budget appears to give provinces some flexibility to allow some temporary workers to become permanent residents, she said. Other previously announced incentives for skills training funded in this budget also help somewhat, she said.
Canada needs a million building workers by 2035 according to the budget. That's a big ask in a nation of 42 million people.
Nov-05 21:03
The Bank of England voted eight-one for a 25-basis-point hike in Bank Rate to 4% at its November meeting, but said policy will not follow a "pre-set path" while the nine Monetary Policy Committee members' published individual paragraphs revealed disagreement over the likelihood of further hikes.
The vote was more hawkish than widely expected, as the single dissent came from Catherine Mann, who voted for a 50-basis-point hike, and with even the previously most dovish-sounding member, Alan Taylor, backing the increase.
The MPC's statement said that "the degree of inflationary pressure in the pipeline is now sufficient to warrant an increase in Bank Rate.” Market pricing moved to imply a December hike is now more likely than not.
Governor Andrew Bailey, who seems to be close to the centre ground on the MPC, put the evolution of the Middle East conflict at the heart of the policy outlook, telling the press conference that "unless progress towards resolving the conflict is made ... a further increase in Bank Rate may be warranted."
The Bank's analysis highlighted the absence of second-round inflation effects in the data so far, stating that "there remains limited evidence of knock-on effects on other prices and wages" but the Monetary Policy Report still had a markedly higher inflation peak. (See MNI POLICY: Lack Of 2nd-Round Effects Weighs On BOE Hawkishness)
The central projection in the report sees CPI inflation peak at 4.9% in Q2 next year. This would "be some 25 basis points higher absent the measures announced at the latest budget," it said in its summary.
"The further planned consolidation is expected to increase the drag from fiscal policy on activity and the output gap in the coming years," it said.
"Activity data in recent months have generally been stronger than expected, adding to the case for modestly tighter monetary policy," it added
DISTINCT VIEWS
Bailey evaded questions about the timing of the next hike at the press conference.
In her individual paragraph published together with the summary, Deputy Governor Sarah Breeden said her reaction function depends on the prospect for second-round effects, saying that the "longer energy prices remain high, the more likely persistent inflationary effects take hold, which would require further tightening in Bank Rate."
Deputy governors Clare Lombardelli and Dave Ramsden noted the balance of risks around the forecast was tilted to the upside, with Lombardelli saying that "in the absence of evidence of weaker inflation pressures, there is likely to be a case for a further increase in rates in the near term."
Megan Greene and Chief Economist Huw Pill, both of whom had voted for hikes at previous meetings, said additional hikes will likely be needed.
Dhingra and Taylor, who had tended to vote for a lower path for Bank Rate than the committee as a whole during its last cutting cycle, emphasised that they did not view this as the start of a hiking cycle.
The fall in the oil price following the U.S. mid-terms came too late for the MPC's forecasts, which as Bailey noted "did not have oil falling to USD95 until May 2027."
In the press conference, Bailey said, "had we known what was going to happen in the last 48 hours, the decision would still be the same."
A box included in the MPR noted that "uncertainty over the length of monetary policy lags is high ... and there is a range of views among the MPC."
"When there remains uncertainty about the length of monetary policy lags, leaning against the risk of second-round effects early may be a more robust strategy than assuming that monetary policy could squeeze out second-round effects quickly after they arise," it said.
Nov-05 15:57About
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