EU-UK: Summit Looks To Reset Ties; Obstacles Remain To Smoother TCA Operation
May-16 13:57
UK Prime Minister Sir Keir Starmer will hosts European Commission and Council presidents, and the EU's foreign policy representative in London on 19 May. The UK gov't has billed the summit as a chance to 'reset' relations with the EU and smooth the operation of the post-Brexit Trade and Cooperation Agreement (TCA). Several high-profile topics are on the agenda, including defence and security, food imports/exports, fisheries, youth mobility, internal security and crime.
- Given the strong impetus for European nations to increase defence spending and bolster their conventional militaries, there has been hope that a deal could be reached that deepens cooperation at the EU level, rather than just between the UK and EU member states.
- As has been the case since the Brexit process began, fisheries, sanitary and phytosanitary (SPS) rules, and free movement remain serious impediments to a smoother functioning of trade and relations.
- The UK's House of Commons Trade and Business select committee's report advocates focus on three areas: 'Defending Our Prosperity' (defence cooperation, intel sharing, Ukraine support), 'energy cooperation', (deepen electricity market integration, align carbon border policies, accelerate joint investment in clean tech), and 'smoothing trade' (SPS agreements, customs simplifications, regulatory cooperation, sector specific agreements).
- The likelihood of any major agreement (barring defence and security) is seen as slim, with the EU not wanting to allow the UK to 'cherry pick' issues while the Starmer gov't will be wary of being seen to 'give in' to Brussels, particularly as the right-wing eurosceptic Reform UK continues to gain support in opinion polls.
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BOC HOLDS KEY RATE AT 2.75%; LESS FORWARD LOOKING AMID TARIFFS
Apr-16 13:45
- BOC HOLDS KEY RATE AT 2.75%; LESS FORWARD LOOKING AMID TARIFFS
- BOC SAYS OFFICIALS WILL PROCEED CAREFULLY AMID COMPETING RISKS
- BOC CAN ACT DECISIVELY IF RISKS SHIFT CLEARLY IN ONE DIRECTION
- BOC SAYS MUST KEEP INFLATION STABLE, WILL AIM TO AID GROWTH
- BOC SAYS A LONG GLOBAL TRADE WAR CAN TRIGGER CANADA RECESSION
BOC: Instant Answers For BOC Rate Decision
Apr-16 13:45
Following are the Instant Answers for the Bank of Canada interest-rate decision:
- Overnight Rate Target (2.75%, unchanged)
- Does the Bank signal it is prepared to LOWER rates in the future? Yes
- Does the Bank signal it is prepared to RAISE rates in the future? Yes
- Does the Bank signal it intends to leave rates on hold until the outlook is clearer? Not answered
BOC: Holds Rate At 2.75%, Cautious And Less Forward Looking Amid Trade War
Apr-16 13:45
- Bank of Canada holds benchmark interest rate at 2.75% after seven prior consecutive cuts.
- "Governing Council will proceed carefully, with particular attention to the risks. That means being less forward-looking than usual until the situation is clearer. It also means we are prepared to act decisively if incoming information points clearly in one direction."
- "We will pay close attention to the risks and uncertainties to the Canadian economy and inflation. These include: the extent to which higher tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve," Governor Macklem said.
- BOC says it must maintain price stability while aiding economic growth.
- BOC says short-term inflation expectations have moved higher.
- Central bank modeled two scenarios: Limited tariffs and uncertainty, new tariffs are negotiated away; and prolonged trade war where Canada Q2 GDP contracts and economy falls into recession for a year.
- In milder scenario inflation +1.8% in 2025, below BOC's 2% target (Jan forecast +2.3%) and 2% in 2026. Deceleration partly attributed to the end of consumer carbon tax. GDP growth seen stalling in Q2.
- In worse scenario CPI +2.7% in 2026 (prior 2.1%). BOC forecasts GDP -1.3% in Q2 2025 at annualized pace. For the full year 2025 GDP slows to +0.8% (Jan projection +1.8%). For 2026 GDP is -0.2% (prior +1.8%).
- The Bank said the partial U.S. tariff relief announced April 9 "moved trade policy back towards the middle of the two scenarios."
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