Dear valued client,
Markets posted another week of gains.
In a bold move, the Federal Reserve announced a significant 50-basis-point cut in interest rates, marking the first reduction in over four years. This decision, which lowers the benchmark rate to between 4.75% and 5%, reflects the Fed’s shift in focus from inflation control to bolstering the job market. While inflation is expected to reach the 2% target by 2026, the Fed is not promising ongoing large cuts but anticipates two further quarter-point reductions before the end of the calendar year. Economists are largely supportive of this aggressive approach, seeing it as a necessary step to safeguard the economy and prevent further increases in unemployment, which currently stands at 4.2%.
Inflation in Canada slowed to 2% in August (compared to 2.5% in July and 2.7% in June), the lowest increase in the consumer price index since February 2021, aligning with the Bank of Canada’s target and bolstering the case for a more aggressive interest rate cut. Economists are predicting a potential 50-basis-point reduction at the central bank’s October meeting, driven by declining gasoline prices and easing core inflation measures. Despite a significant rise in mortgage interest costs, which remain a key inflation driver, the overall deceleration suggests that inflationary pressures are waning, increasing speculation about further monetary easing to support the economy. The recent byelection results were a significant blow to the Liberal Party, highlighting growing dissatisfaction with Prime Minister Justin Trudeau’s government. In a historic loss, the Liberals were defeated by the Bloc Québécois in the LaSalle-Émard-Verdun riding, marking the first time the party lost a Montreal riding in over 30 years. This recent election result is compounded by the resuming of the
Foreign Interference Commission as it continues to investigate meddling by countries such as China, Russia, India, and Iran in Canada’s political system. The first phase of the inquiry revealed that foreign actors used slander and voter suppression tactics, targeting opposition MPs critical of Beijing, including Conservatives Michael Chong and Erin O’Toole, and NDP’s Jenny Kwan. A CSIS report found that China had “clandestinely and deceptively interfered” in the 2019 and 2021 elections, with concerns raised that some politicians may have colluded with hostile states. Although interference impacted certain ridings, the overall election results were not significantly altered. Time will tell what the Commission reports in its final analysis.
Over 2,700 Hezbollah operatives were injured and nine killed in Lebanon when their wireless pagers exploded simultaneously, followed by another wave of attacks where walkie-talkies also detonated, killing at least 32 people – including two children – over two days. Hezbollah blamed Israel, which had signaled plans to intensify its military campaign against the group. The explosions have heightened regional tensions, with Hezbollah vowing retaliation. The devices, part of a new shipment used by Hezbollah after concerns that their cellphone networks were compromised, detonated mysteriously, while Israel has declined to comment on its involvement.
“Few people have the wisdom to prefer the criticism that would do them good, to the praise that deceives them.” – François de la Rochefoucauld
Have a terrific weekend,
PW
