Getting caught up on a week that got away? Here’s your weekly digest of The Globe’s most essential business and investing stories, with insights and analysis from the pros, stock tips, portfolio strategies and more.
Loblaw and other grocers deny profiteering from food inflation
Top executives at Canada’s largest grocery retailers including Loblaw, Metro and Sobeys were grilled by members of Parliament this week on whether their companies were profiteering from inflation. As Irene Galea reports, grocers denied responsibility for food inflation and instead attributed higher prices to global events, such as the Ukraine war and weather patterns affecting agriculture. They also noted that Canadian grocery price increases have actually risen at slower rates than in other countries, such as the United States and Britain. “The idea that grocers are causing food inflation is not only false, it’s impossible,” Loblaw Cos. Ltd. president Galen Weston said, adding that Loblaw profits $1 for every $25 spent at its stores. He said those profits were driven by gains in Loblaw’s non-food departments: pharmacy, apparel and beauty.
Finally, an interest rate pause – unless you carry a credit card balance
The Bank of Canada held its benchmark interest rate steady at 4.5 per cent, pausing its year-long campaign to increase borrowing costs after raising its overnight rate eight consecutive times since March, 2022, writes Mark Rendell. The decision made the Bank of Canada the first major central bank to halt monetary policy tightening; however, the bank emphasized that this is a “conditional” pause, and that it may raise rates again if inflation proves stickier than expected. The interest-rate pause is welcome news to many Canadians, especially homeowners with variable-rate mortgages that change with interest rate fluctuations. But Rob Carrick warns that for those who carry a credit card balance, the harshest interest-rate hikes of all are still underway at the big banks.
More money (from the government), more problems (for inflation)
At the end of 2022, government payouts to individual Canadians jumped by more than $20-billion, an increase of 7.6 per cent from the previous quarter, according to Statistics Canada, to help people cope with high inflation. The federal government sent out a one-time payment that doubled the GST tax credit for an estimated 11 million individuals and families, while some provincial governments disbursed cheques to their residents. However, these transfers are working at odds with the Bank of Canada’s efforts to lower inflation. Cash payouts helped people spend more money, despite sharply higher interest rates that are meant to curb demand. Matt Lundy takes a closer look at the drawbacks to income benefits in this week’s Decoder.
Inside the relaunch of Zellers
The Globe’s Susan Krashinsky Robertson got a sneak peak at the Zellers pop-up shop opening in a Bay store in Mississauga later this month, one of the first of 25 planned retailers across the country. At nearly 8,000 square feet, the space features Zellers’s iconic red and white signage, with housewares, furniture, kids’ toys and clothing, pet supplies and apparel on display, the majority of products designed by the discount retailer’s new private label, Anko. HBC is hoping the Zellers reboot will draw in curious customers who might not otherwise visit Bay stores, not to mention price-sensitive Canadians looking for relief amid inflation. To that end, for the first time ever, Zellers will also have an e-commerce strategy on The Bay’s website, so that shoppers across the country are able to shop.
OSFI reviews high-interest cash ETFs
The federal banking watchdog has launched a review of cash exchange-traded funds, one of Canada’s most popular retail investments, amid a Bay Street spat that stems from surging demand for them. According to Tim Kiladze and Clare O’Hara, the Office of the Superintendent of Financial Institutions is looking into any liquidity concerns posed by cash ETFs, which are hybrid funds that function like high-interest savings accounts, yet offer much better interest rates – around 4.99 per cent annually. Cash ETFs are able to pay high interest rates because select banks offer them access to wholesale funding, but if OSFI takes issue with them, it could order changes that would lower the interest rates retail clients earn.
Sign up for MoneySmart Bootcamp: If you want to improve your financial fitness, The Globe’s MoneySmart Bootcamp newsletter course is for you. This new five-part course written by personal finance reporter Erica Alini will improve your personal finance skills, including budgeting, borrowing and investing. Subscribe to the MoneySmart Bootcamp and you’ll receive an e-mail a week to work a different financial muscle. Lessons will land in your inbox Wednesday afternoons.
Now that you’re all caught up, prepare for the week ahead with The Globe’s investing calendar.