View of the Portuguese parliament on the day of the vote on the 2024 state budget bill on final reading amid Prime Minister Antonio Costa’s resignation, in Lisbon, Portugal, November 29, 2023. REUTERS/Pedro Nunes/File Photo Acquire Licensing Rights
LISBON, Nov 29 (Reuters) – Portugal’s parliament on Wednesday extended tax breaks for foreign residents until the end of next year despite criticism that the scheme has stoked housing prices to levels unaffordable to many Portuguese.
Under the extension, applicants must show they have prepared their move to Portugal during 2023, namely through an employment or a housing contract signed by the end of December.
Launched in 2009, the scheme allows people who become residents by spending more than 183 days a year in the country to benefit during a 10-year period from a special 20% tax rate on Portuguese-sourced income derived from “high value-added activities”, such as doctors and university teachers.
Other benefits of the scheme – known as Non-Habitual Resident – include tax exemptions on almost all foreign income if taxed in the country of origin and a 10% flat tax rate on pensions from a foreign source.
It was introduced to attract investors and professionals as Portugal suffered from the financial crisis.
Portuguese citizens who lived abroad for five years or more can also apply.
Prime Minister Antonio Costa promised in October to close the scheme by the end of the year, calling it a “fiscal injustice that is no longer justified”. It was one of the measures included in the draft 2024 budget.
But after Costa’s resignation earlier this month, his ruling Socialist Party backtracked, suggesting it should stay open until the end of next year. The decision was approved on Wednesday in the final vote on the budget bill.
The Socialists said in a statement it was important to “safeguard the legitimate expectations of people who have already made the decision to immigrate or return to Portugal”.
Official data showed that over 74,000 people had benefited from the scheme by the end of 2022. Last year the tax exemptions
cost the state budget more than 1.5 billion euros ($1.65 billion), an annual increase of 18.5%.
($1 = 0.9106 euros)
Reporting by Sergio Goncalves
Editing by Catarina Demony and Gareth Jones
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French Minister for Economy, Finance, Industry and Digital Security Bruno Le Maire and French Junior Minister for Public Accounts Thomas Cazenave leave following the weekly cabinet meeting at the Elysee Palace in Paris, France, September 27, 2023. REUTERS/Johanna Geron Acquire Licensing Rights
PARIS, Nov 19 (Reuters) – France wants to reduce government spending on office space and may consider real estate sales in a bid to reduce the state deficit, the budget and finance ministers said in a media interview on Sunday.
The government also plans to review unemployment benefits for seniors, they said.
Budget Minister Thomas Cazenave told La Tribune that the government wants to reduce the amount of office space occupied by the administration by 25%.
“There is real leverage for savings there, in particular given the new ways of working,” he said, referring to the increase in home working following the COVID-19 pandemic.
He said the ratio of office space area per civil servant is 24 square metres (258 square feet), far above private industry standards, and the government wants to reduce that to 16 square metres.
“We may also consider real estate sales,” he added.
Asked about whether the government could achieve its target of reducing the unemployment rate from 7% to 5% by 2027, Finance Minister Bruno Le Maire said this would require reviewing social policies, notably unemployment benefits.
“We have worked hard to move from 9% to 7%, but to move to 5%, courageous choices need to be made… All the schemes that feed seniors’ unemployment must be reviewed,” Le Maire said.
Cazenave also confirmed that the government will seek an additional 12 billion euros of spending cuts for the 2025 budget, as discussed with Prime Minister Elisabeth Borne on Thursday.
“We confirm spending cut targets of 16 billion euros ($17.5 billion) for the 2024 budget, and we are already preparing 12 billion of savings for the 2025 budget,” he said, adding that the government was still aiming to reduce its deficits to 4.4% of GDP in 2024 and 3.7% in 2025.
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Reporting by Geert De Clercq; Editing by Hugh Lawson
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HOUSTON/BRASILIA/RIO DE JANEIRO, Nov 17 (Reuters) – Brazil’s leftist President Luiz Inacio Lula da Silva pressed the head of state-run oil firm Petrobras (PETR4.SA), Jean Paul Prates, to modify the company’s 2024-2028 investment plan to prioritize local job creation, five sources told Reuters.
Lula’s requests to Prates may raise fresh fears of political interference in the company, which under previous administrations has come under pressure to boost Brazil’s economy over the concerns of private investors.
In a Nov. 9 meeting in Brasilia, Prates presented Lula with a draft of the investment plan, which is due to be unveiled at the end of this month, the sources said.
They said Lula complained about Petrobras’ lack of planned investments in Brazil’s shipbuilding industry, a sector that has long been close to his heart and which he hopes to revitalize.
Lula told Prates that Petrobras should commission 25 ships to be built in Brazilian shipyards, instead of the four currently planned.
He also complained about Petrobras hiring foreign suppliers, arguing it should instead focus on using Brazilian firms, the sources said.
Additionally, Lula asked for Petrobras to push forward completion of a fertilizer factory in Mato Grosso do Sul state by two years, so it is finished before his term ends in 2026.
Another of Lula’s suggestions was to kickstart projects currently listed in the plan as under preliminary analysis.
When asked for comment, Petrobras referred Reuters to a Nov. 8 statement, in which it said it is still finalizing its investment plan. Any eventual changes to its spending plans would follow the strategic guidance approved by the company’s board, the statement said.
Brazil’s presidency did not immediately respond to a request for comment.
Last week, Reuters reported that Petrobras’ plan will include around $100 billion in investments that the firm is both analyzing and those it has already committed to. In the previous 2023-2027 plan, Petrobras projected $78 billion in investments.
The sources said Lula’s requests will likely complicate completion of the plan before the end-November deadline. Prates is due to meet the president next week to discuss alterations.
The plan has yet to be presented for approval by Petrobras’ board.
Reporting by Sabrina Valle, Lisandra Paraguassu, Rodrigo Viga Gaier; Additional reporting by Marta Nogueira; Writing by Fabio Teixeira; Editing by Roberto Samora, Gabriel Stargardter and Marguerita Choy
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BEIJING, Nov 15 (Reuters) – China’s industrial output and retail sales growth beat expectations in October, but the underlying economic picture highlighted significant pockets of weakness with the crisis-hit property sector continuing to forestall a full-blown revival.
The world’s second-biggest economy has struggled to mount a strong post-COVID recovery as distress in the housing market, local government debt risks, slow global growth and geopolitical tensions have dented momentum. A flurry of policy support measures have proven only modestly beneficial, raising pressure on authorities to roll out more stimulus.
China’s industrial output grew 4.6% in October year-on-year, accelerating from the 4.5% pace seen in September, data from the National Bureau of Statistics (NBS) showed on Wednesday, beating expectations for a 4.4% increase in a Reuters poll. It also marked the strongest growth since April.
Retail sales rose 7.6% in October with improvement in both auto and restaurant sales growth, quickening from a 5.5% gain in September and hitting the fastest pace since May. Analysts had expected retail sales to grow 7.0% due to the low base effect in 2022 when COVID curbs disrupted consumers and businesses.
Analysts struck a cautious note on the upside data surprise, noting that the property sector remains a weak link for the economy and pointed to the lack of major reforms as another impediment to sustainable longer term revival in growth.
“Due to the impact of holidays and low base effect in 2022, year-on-year figures cannot reflect the actual momentum of the economy,” said Xing Zhaopeng, senior China strategist at ANZ.
He said month-on-month figures suggest economic momentum has further weakened with “increasing deflationary risks”.
Louise Loo, China economist at Oxford Economics, said prolonged weakness in external demand could hamper industrial production despite strengthening last month as destocking pressures eased further.
Consumption didn’t make much headway either during the eight-day Golden Week holiday earlier in October. Trips made in that period missed government estimate as economists say consumers are concerned about their jobs and income growth in an uncertain employment market.
The nationwide survey-based jobless rate stayed at 5.0% in October, unchanged from September, the NBS data showed. Youth unemployment, which hit a record high 21.3% in June, wasn’t available after the statistics bureau stopped publishing it since July.
China has been ramping up efforts to revive its post-COVID economy with a slew of policy support measures in recent months, although the positive effects have been marginal so far.
Wednesday’s upbeat data comes as a raft of other indicators for October released over recent weeks pointed to muted growth momentum. Imports grew unexpectedly, but exports shrank at a quicker pace, household borrowing remained weak, consumer prices swung lower while factory deflation persisted.
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Authorities are faced with a challenging task as any aggressive monetary support would further widen interest rate differentials between China and the West, especially the United States, and dent an already weakened yuan. That could intensify capital outflows, while Beijing is wary of a return to the big-bang fiscal stimulus of the past which created massive debt and hamstrung the economy.
The economy grew faster-than-expected in the third quarter, with analysts generally expecting it to reach the government’s full-year growth target of around 5%, though a full-blown recovery is still some time away.
The yuan held near a more than two-month high after surprisingly softer U.S. inflation reading overnight boosted bets that the Federal Reserve had reached the end of its tightening cycle.
PROPERTY, INVESTMENT DISAPPOINT
The country’s central bank, People’s Bank of China (PBOC), boosted liquidity injections but kept the interest rate unchanged when rolling over maturing medium-term policy loans on Wednesday.
In a rare revision last month, the government also lifted its 2023 budget deficit to around 3.8% of gross domestic product from 3% to account for the planned issuance of 1 trillion yuan ($137.10 billion) in sovereign bonds.
The PBOC has cut banks’ reserve requirement ratio (RRR) twice this year to free up liquidity to aid the economic recovery. Analysts widely expect another RRR cut and an interest rate cut in the final months of this year.
China’s crisis-hit property sector has yet to see a meaningful rebound despite strengthened support measures for homebuyers, including relaxing of home purchase restrictions, lowering in borrowing costs and other programmes.
Property investment fell 9.3% in January-October year-on-year, after a similarly sharp 9.1% drop in January-September.
Fixed asset investment disappointed with a 2.9% expansion year-on-year in the first 10 months, missing expectations for a 3.1% rise. It grew 3.1% in the January-September period.
Confidence among private businesses also remained depressed, with investment in the sector shrinking 0.5% during January-October, narrowing slightly from the 0.6% decline in the first nine months.
“Overall, the data published today suggest that the recovery was struggling to gain a strong footing at the start of Q4, but it was not nearly as weak as some had feared,” said Sheana Yue, China economist at Capital Economics.
“Policy looks set to remain supportive, and possibly even stepped up to prevent the economy from backsliding.”
($1 = 7.2939 Chinese yuan renminbi)
Additional reporting by Albee Zhang and Liangping Gao;
Editing by Shri Navaratnam
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[1/4]View of the construction site of the Elbtower building, owned by Rene Benko’s Signa and a Commerzbank subsidiary, in Hamburg Germany, November 2, 2023. REUTERS/Fabian Bimmer Acquire Licensing Rights
FRANKFURT, Nov 3 (Reuters) – Construction of one of Germany’s tallest buildings has suddenly halted midway after the developer stopped paying its builder, yet another ominous sign for the nation’s troubled property sector.
Signa, the Austrian property giant and an owner of New York’s Chrysler Building, had been making steady progress this year on the planned 64-story Elbtower skyscraper in Hamburg.
But Signa, founded by René Benko, has fallen behind on its payments to its builder, Lupp, an executive of the construction firm said.
“Our construction activities at Elbtower have been temporarily suspended due to outstanding payments from the developer,” Matthias Kaufmann, who oversees Lupp’s finances, said in an email to Reuters.
Signa didn’t respond to requests for comment. The city of Hamburg and a minority investor, the real-estate subsidiary of Germany’s Commerzbank (CBKG.DE), confirmed the stoppage.
The interruption raises questions about the future of the tower, with an estimated value of 1.3 billion euros ($1.38 billion) upon completion. It has also prompted warnings from city officials, and is another indicator of troubles hitting the property sector in Europe’s largest economy.
The real-estate sector was a bedrock of Germany’s livelihood for years, accounting for roughly a fifth of output and one in 10 jobs. Fuelled by low interest rates, billions were funnelled into property, which was viewed as stable and safe.
Now a sharp rise in rates and building costs has put an end to the run, tipping developers into insolvency as bank financing dries up, deals freeze and prices fall.
Commerz Real, the Commerzbank subsidiary, said talks were ongoing with Signa and Lupp to “find a common solution” and it expected building to resume.
Elbtower is in the HafenCity district that is also home to a new concert hall, the Elbphilharmonie. Tenants are to include a Nobu hotel and restaurant, the risk advisor Aon (AON.N), and a local bank.
Timo Herzberg, CEO of Signa Real Estate, hosted viewers just weeks ago to the site as the shell of the building neared 100 metres (330 feet) high.
“The distinctive concrete pillars now give an increasingly clear idea of the shape that Hamburg’s future landmark will have once it is completed,” he posted on LinkedIn.
Karen Pein, Hamburg’s senator for city development and housing, warned that Signa needed to stick to agreed milestones or face consequences.
A contract “allows the City of Hamburg to dismantle the construction work performed to date, sell it to a third party for completion, or complete the construction itself,” she said in a statement.
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SYDNEY, Nov 1 (Reuters) – Chances of an imminent hike in Australian interest rates grew on Wednesday after data showed house prices rebounding to near record highs and the International Monetary Fund recommended tightening monetary and fiscal policy screws to curb inflation.
Markets responded by pricing in a near-70% chance that the Reserve Bank of Australia (RBA) will raise rates by a quarter point to 4.35% when it meets on Nov. 7, ending four months of keeping rates on hold.
High readings for inflation and consumer spending had already suggested policy might be too loose, and that view was reinforced by a CoreLogic report showing house prices had regained all the ground lost during the RBA’s previous 12 rate hikes.
“The turnaround in property prices has been quite remarkable,” declared Gareth Aird, head of Australian economics at CBA. “The RBA’s 400 basis points of tightening reduced home borrower capacity by 30%, but property prices are now back to their previous peak.”
So far this year, values in Sydney, Perth and Brisbane are all up more than 10%, adding billions to household wealth at a time when the RBA would really rather they not be spending.
A separate report from PropTrack foresaw further gains ahead given booming migration, a tight rental market and a supply squeeze as home building lagged far behind population growth.
IMF WEIGHS IN
The IMF also weighed in on Wednesday by arguing tighter monetary and fiscal policy was needed in order to bring inflation back to the RBA’s target band of 2-3%.
In its regular review of Australia, the IMF staff noted the resilience of the economy as the jobless rate remained near a 50-year low of 3.6%, while economic output was estimated to be running at 1% above potential.
“Staff therefore recommend further monetary policy tightening to ensure that inflation comes back to the target range by 2025 and minimize the risk of de-anchoring inflation expectations,” they said.
They also called for different levels of government to take a more measured approach to infrastructure investment as massive projects compete for scarce resources and push up costs.
S&P Global Ratings estimates capital expenditure by Australian states and territories will be a record A$320 billion over the next four years.
“Each project on its own probably doesn’t add that much to national inflation,” said Martin Foo, lead analyst at S&P Global Ratings. “But the problem is that if you add up all of these projects together, then they are having a significant impact.”
Reporting by Stella Qiu and Wayne Cole; Editing by Jamie Freed & Simon Cameron-Moore
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WASHINGTON, Oct 31 (Reuters) – U.S. labor costs increased solidly in the third quarter amid strong wage growth while house price inflation accelerated in August, the latest signs that the Federal Reserve could keep interest rates high for some time.
The reports on Tuesday pose a threat to efforts by the U.S. central bank to bring inflation to its 2% target. Fed officials started a two-day policy meeting on Tuesday. The U.S. central bank is expected to leave interest rates unchanged but maintain its hawkish bias at the conclusion of that meeting as a recent spike in U.S. Treasury yields and stock market sell-off have tightened financial conditions.
“Those wage increases are likely to keep inflation running above target while higher house prices could lead to a pick-up in shelter inflation,” said Andrew Hollenhorst, chief U.S. economist at Citigroup in New York. “For now the Fed will remain on-hold, but the evident upside risk to inflation means Chair (Jerome) Powell and committee will keep potential further rate hikes on the table.”
The Employment Cost Index (ECI), the broadest measure of labor costs, rose 1.1% last quarter after increasing 1.0% in the April-June period, the Labor Department’s Bureau of Labor Statistics reported. Economists polled by Reuters had forecast the ECI would rise 1.0%.
Labor costs increased 4.3% on a year-on-year basis, the smallest gain since the fourth quarter of 2021, after advancing by 4.5% in the second quarter. Growth in annual compensation is gradually slowing after peaking at 5.1% last year, in line with some easing in labor market conditions. It, however, remains well above the pre-pandemic pace.
The rise in compensation helps to explain the surge in consumer spending last quarter, which contributed to the fastest economic growth rate in nearly two years.
The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack and a predictor of core inflation because it adjusts for composition and job-quality changes. Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25%-5.50% range.
Wages increased 1.2% in the third quarter after climbing 1.0% in the prior three months. They were up 4.6% on a year-on-year basis after advancing by the same margin in the second quarter. Strong wage growth is being driven by worker shortages that still persist in some services industries.
September’s job openings data on Wednesday will shed light on the state of demand for labor.
Though consumers continue to worry about the economy’s outlook, more are planning vacations over the next six months and are not contemplating scaling back in a major way on purchases of motor vehicles and other big-ticket items, according to a survey from the Conference Board on Tuesday.
Their concerns about the economy center around the violence in the Middle East as well as domestic politics, likely reflecting the protracted battle to elect a speaker in the U.S. House of Representatives.
The Conference Board’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, rose to 26.3 from 25.5 in September. This measure correlates to the unemployment rate from the Labor Department. Overall, the consumer confidence index dropped moderately to 102.6 this month from 104.3 in September.
“The U.S. consumer is in okay financial shape,” said Bill Adams, chief economist at Comerica Bank in Dallas. “For well-off Americans, inflation is a source of frustration but not enough to force cutbacks in overall spending.”
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Stocks on Wall Street were trading lower. The dollar gained versus a basket of currencies. U.S. Treasury prices rose.
CONSUMER CONFIDENCE EBBS
The compensation report showed private-sector wages gained 1.1% after rising 1.0% in the April-June quarter. They advanced 4.5% on a year-on-year basis. There were notable increase in wages in the financial activities and education and health services sectors. But wage growth slowed in the leisure and hospitality industry, which had experienced worker shortages.
Manufacturing also reported a moderation in wage gains.
State and local government wages shot up 1.8% after increasing 0.8% in the prior quarter. They were driven by rises in education and health services as well as public administration. State and local government wages increased 4.8% on a year-on-year basis, the most since the government started tracking the series in 2001.
Inflation-adjusted wages for all workers rose 0.9% on a year-on-year basis after jumping 1.7% in the second quarter. While slowing, wages should continue to underpin spending.
Benefits rose 0.9% last quarter after climbing by the same margin in the April-June period. They increased 4.1% on a year-on-year basis.
Economists expected the higher wages and benefits to pressure corporate profits, with Nationwide chief economist Kathy Bostjancic noting that “some companies are losing a bit of their pricing power.”
A third report from the Federal Housing Finance Agency showed house prices increased 0.6% in August, driven by an acute shortage of previously owned homes. House prices rose 0.8% in July. While lofty house prices are boosting household wealth, they could keep inflation elevated in the near-term.
In the 12 months through August, house prices accelerated 5.6% after advancing 4.6% in July. With the rate on the popular fixed 30-year mortgage near 8%, some economists see limited scope for house prices to keep rising, which would result in rents contributing less to inflation.
Higher rents were the major drivers of inflation in September after cooling somewhat in prior months.
Even as house prices continue to march higher, there are signs that shelter inflation could moderate next year.
A fourth report from the Commerce Department’s Census Bureau showed the rental vacancy rate jumped 6.6% in the third quarter, the highest since the first quarter of 2021, from 6.3% in the April-June period.
“We still think it is likely that the surge in mortgage rates will slow the rise in prices in the secondary market going forward,” said Lou Crandall, chief economist at Wrightson ICAP in New York.
Reporting by Lucia Mutikani; Editing by Paul Simao and Deepa Babington
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SYDNEY, Oct 26 (Reuters) – PwC Australia said on Thursday that dozens of staff who had been set to move across to spin-off consultancy Scyne Advisory will no longer have roles at the new firm and have been told to look for jobs internally.
PwC Australia sold its government advisory business, responsible for a fifth of revenues, to private equity group Allegro Funds for a nominal A$1 in August after government agencies cut ties over a national scandal involving leaked tax plans.
Over 1,500 people out of PwC Australia’s more than 9,000 staff were expected to move to the new firm, PwC said in September.
PwC, one of the world’s “big four” consultancy and auditing firms, said on Thursday, however, that 78 of those staff will not have roles at Scyne because a number of PwC partners had opted not to transfer.
The 78 have been offered paid leave and encouraged to look at the internal jobs board, the firm said in a statement.
“PwC will do everything in its power to help support these individuals,” CEO Kevin Burrowes said in a statement.
A Scyne Advisory spokesperson said a delay in closing the deal, originally planned for September, changes to its “partner mix” and the need to establish Scyne as a “sustainable business” were factors in the decision.
The move comes as Scyne Advisory gears up to reclaim advisory work that netted PwC Australia A$680 million ($427 million) last financial year.
The Department of Finance, which sets procurement rules, this month gave Scyne the all clear to resume work with the government and said no staff involved in the tax leaks scandal had transferred to the firm.
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Reporting by Lewis Jackson; Editing by Lincoln Feast and Edwina Gibbs
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[1/2]Hong Kong Chief Executive John Lee delivers his annual policy address at the Legislative Council in Hong Kong, China October 25, 2023. REUTERS/Tyrone Siu Acquire Licensing Rights
HONG KONG, Oct 25 (Reuters) – Hong Kong’s leader focused on bolstering the property market and stabilising the ailing economy in his annual policy blueprint on Wednesday, while confirming new national security laws would be enacted next year to counter meddling by “external forces”.
Chief Executive John Lee said Hong Kong’s economy, which contracted 3.5 percent last year, would “resume growth this year” as inbound tourism and consumption improved, and unemployment fell.
Hong Kong’s economy grew 2.2% in the first half of the year, and is expected to grow four percent this year. year-on-year.
Lee noted, however that the external environment remains challenging given interest rate hikes in some advanced economies, with Hong Kong investment and asset markets “negatively impacted.”
NEW SECURITY LAW
Lee, who was sanctioned by the U.S. government for his role in cracking down on freedoms after mass pro-democracy protests in 2019, also emphasized the need to further bolster national security.
“External forces continue to meddle in Hong Kong affairs,” he said, without giving specifics or naming any country.
Despite Hong Kong’s attempts to restore the city’s international reputation and lure more capital, further security legislation including anti-espionage laws, known as Article 23, would be enacted by the end of 2024, Lee said.
Some Western governments have criticised the ongoing national security clamp down, which has led to the imprisonment of many opposition democrats and closure of liberal media outlets.
Reporting by Clare Jim, Twinnie Siu, Jessie Pang, Donny Kwok; Writing by James Pomfret; Editing by Simon Cameron-Moore
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BENGALURU, Oct 23 (Reuters) – The Bank of Canada is probably done raising interest rates and will hold them at 5.00% for at least six months, according to a Reuters poll of economists that found a majority expecting a reduction in the second quarter of 2024 as the economy slows.
Up until recent days, the prospect of another quarter-point rate rise on Oct. 25 remained a serious risk, but a report this week showing inflation fell more than expected in September has mostly solidified views that no more is needed for now.
The economy is showing signs of strain from 475 basis points of rate hikes since early 2022, likely giving policymakers enough reason to wait and see how much more past rate decisions will crimp demand and an already cooling housing market.
In the meantime Canada’s job market remains tight, with explosive payrolls growth in September, which has left BoC Governor Tiff Macklem confident that while the economy is slowing, it is not headed for a serious recession.
The risk of a revival in inflation, last measured at 3.8%, has led most to forecast now is not the time for the central bank to strongly signal they are done raising rates.
Twenty-nine of 32 economists polled Oct. 13-20 expect no change to the central bank’s 5.00% overnight rate (CABOCR=ECI), with the remaining three expecting a 25 basis point hike.
“The Bank of Canada’s rate decision next week is going to be a hawkish hold,” said Randall Bartlett, senior director of Canadian economics at Desjardins.
“It will recognize the economy has cooled more quickly than it anticipated back in July and inflation in September, particularly core inflation, demonstrated a pace of slowing that provides us with some room for cautious optimism.”
While most are confident the central bank is done hiking, a significant minority of economists who answered an additional question, 8 of 18, said the risk of the BoC raising rates at least once more is “high”.
With inflation still running at nearly double the BoC’s 2.0% target and not expected to fall that low until at least 2025, the central bank does not yet have leeway for policy easing.
Still, a two-thirds majority, 20 of 30, see the BoC cutting its overnight rate at least once before end-June 2024. That is a slightly higher proportion than in a poll published this week on rate expectations for the U.S. Federal Reserve, which is overseeing a stronger economy.
The distribution of where economists saw the overnight rate by end-June was split many ways. Seven economists held the median view of 4.75%, 12 see it at 4.50% or lower and 11 expect it to be at 5.00% or 5.25%.
The most recent BoC business outlook survey showed the weakest conditions since the COVID-19 pandemic, underscoring worries the economy could be headed for trouble in coming months.
Housing market activity has dropped off and house prices are also falling as higher mortgage rates put pressure on households among the most indebted in the world.
While most in the latest poll do not expect a major downturn, one-third of economists surveyed had an official recession in their forecasts, defined as two consecutive quarters of contracting economic output.
“In our view, monetary policy tightening is only now fully working its way through the economy,” said Tony Stillo, director of Canada economics at Oxford Economics.
“Unlike the Bank that predicts a soft landing, we expect Canada has slipped into a recession that will help return inflation back to target by late next year. However, the Bank may choose to err on the side of over-tightening rather than under-tightening.”
(For other stories from the Reuters global economic poll:)
Reporting by Milounee Purohit, Polling by Maneesh Kumar; Editing by Ross Finley and Jonathan Oatis
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