Daily Pulse

Canada

The Bank of Canada is scheduled to release its latest interest rate decision Wednesday along with its plans for federal bond purchases. The key interest rate target has been on hold at 0.25 per cent since the onset of the pandemic last year and the central bank has said it won't increase the rate until the economy has recovered likely late next year. In April, the bank rolled back its federal bond purchasing program, citing improving economic conditions. BMO's Benjamin Reitzes says no policy changes are expected today. However, he says the central bank is likely to tone down the optimism it showed in April, given the lengthy third-wave lockdowns and expectations of less-than-robust economic growth in the second quarter. The decision today will be by written announcement only, but deputy governor Timothy Lane is scheduled to discuss the decision in a speech tomorrow.

The battle for a controversial Canadian oil pipeline is heating up, with Pembina Pipeline Corp. forming a partnership with an Indigenous group to buy the key Trans Mountain pipeline in a challenge to another native group seeking full ownership. Canada’s third-largest pipeline company said in an emailed statement it has formed Chinook Pathways, an “equal” partnership with Western Indigenous Pipeline Group to pursue ownership of the government-owned Trans Mountain once an expansion of the system is completed. The announcement came after another Indigenous group called Project Reconciliation announced it would seek to fully own the pipeline. The pipeline, Canada’s only oil pipeline system that delivers crude oil from Alberta to the Pacific Coast, has been the focus of fierce environmental opposition. While some indigenous groups seek to own Trans Mountain, others in British Columbia see it as a threat to the environment and are fighting to stop the expansion project, which is scheduled for completion late next year.

United-States

The Senate on Tuesday passed one of the largest industrial bills in U.S. history in a bipartisan effort to ensure the U.S. remains competitive with China as one of the globe’s technological powerhouses. The bill, which passed the chamber 68-32, commits roughly $250 billion in funding for scientific research, subsidies for chipmakers and robot makers, and an overhaul of the National Science Foundation. The scope of the bill, the final product of at least six Senate committees and almost all members of the chamber, reflects the many fronts in the U.S.-China rivalry. It also likely represents one of the last major bipartisan initiatives of 2021, proof that U.S. lawmakers are broadly in favor of legislation that works to counter Beijing’s economic and military expansion. Failure to expand the nation’s semiconductor production, or reroute rare earths supply chains, advocates say, could leave the U.S. at a strategic disadvantage in the years ahead.

The US consumer price index for May is set to be released Thursday. Economists are expecting the CPI to rise 4.7% from a year earlier, according to Dow Jones. In April, the CPI increased 4.2% on an annual basis, the fastest rise since 2008. The Fed has previously contended that higher price pressures are just temporary as the economy continues to rebound from the pandemic-induced recession.

Europe

The European Union wants the United States to commit to end their aircraft-related tariffs next week, according to a draft statement seen by CNBC, as both sides look to get the transatlantic relationship back on track. The EU is also hoping that President This link will open in a new tab. Joe Biden, who is due in Brussels for a summit early next week, will vow to end steel and aluminum duties before December this year, according to the document from the EU. The European Council, the institution hosting the summit, is responsible for preparing the joint statement that the leaders will look to greenlight. Bloomberg first This link will open in a new tab. reported the news. An EU official, who didn’t want to be named due to the sensitive nature of the subject, told CNBC that the European Union is looking to “push” the United States to agree on an easing of trade tariffs that emerged during the This link will open in a new tab. Donald Trump presidency.

Asia

China’s producer price index rose 9% in May from a year ago as commodity prices surged, the National Bureau of Statistics said Wednesday. That marked the fastest increase in production costs since September 2008, when the index rose 9.13%, according to Wind Information. While the gains surpassed expectations of an 8.5% increase, according to a Reuters poll, the rise does come off a low base. The index fell 3.7% in May 2020 during the initial months of the coronavirus pandemic. In the last several weeks, the central Chinese government has announced This link will open in a new tab. additional support for small businesses, particularly those affected by rising raw material prices. Wednesday’s data release showed that prices nearly doubled, rising 99.1%, for China’s petroleum and natural gas extraction industry, and climbed 34.3% for oil, coal and other fuel-processers. On the other hand, private consumer costs rose only slightly. The statistics bureau said Wednesday that the consumer price index rose 1.3% year on year in May, missing expectations for a 1.6% increase. The index has been dragged down by a This link will open in a new tab. drop in pork prices, following their surge in the last two years.

The author

Michel Doucet

Michel Doucet

Vice-President and Portfolio Manager
After obtaining a Bachelor's degree from the Faculty of Social Sciences at the Université du Québec in Montréal and his Master’s degree, Michel Doucet began his career as a junior economist at the National Bank head office in Montreal. In 1992 he joined the institutional equities and fixed income group at Lévesque Beaubien Geoffrion as an economist and market analyst. Over the years, he has led various projects related to the North American and international economies as well as Canadian public finances. In 1996, the team of institutional economists to which he belongs was ranked first in Canada by Brendan Wood International. In August 1997, Mr. Doucet joined the personal services division of Lévesque Beaubien Geoffrion where he served as an economist, fixed income market analyst and vice president. In 2004, he joined the Desjardins Securities full service team as Vice President. He now occupies the roles of fixed income strategist, economist and portfolio manager. He manages the Securities Portfolio Advisory Group, advisor marketing and distribution of financial planning and insurance.