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Central-bank-watching and Alberta’s busted budget

Feb. 24: Speeches from the BoC and the Fed, plus, the debate over tax-free savings and the battle to pay with your phone


 

MORNING-PLAYBOOK-STORY
For central-bank- and budget-watchers, today is your day.

While there are no interest rate announcements, there will be speeches by both Bank of Canada Governor Stephen Poloz, and by Federal Treasury Chair Janet Yellen, in the U.S., which will be closely parsed for signs of rate cuts, hikes, and the impact of the oil rout. On that note, oil has been between $49 and $50 so far this morning.

Poloz’s speech, at the Western University, will focus on “reinventing central banking,” and you can watch the speech and press conference here. Yellen will be at the Senate banking committee for a semi-annual monetary-policy meeting.

Alberta will also announce the provincial budget today, which is expected to measure how bad the oil rout has been for the province’s bottom line. First-quarter banking season also begins this morning, with BMO kicking off a Big Six reporting season that is expected to be less than bountiful. In Europe, the European Commission is also sounding optimistic about Greece’s very last-minute reform proposals, but a more definite answer on the country’s finances should arrive by end of today.

In Canadian-U.S. news, the bill for the Keystone pipeline is expected to reach U.S. President Barack Obama’s desk, where it is also expected to meet his presidential veto. The veto will be made “without drama or fanfare,” according to the White House, which might be wishful thinking.

Alberta’s oil woes. Today, the province’s finance minister is expected to update the province’s budget, and the numbers are not looking bright. Premier Jim Prentice says the country’s surplus has turned into a half-billion-dollar deficit, with a $7-billion hole in the treasury, as oil companies have begun slashing budgets and laying off staff. A recent report by the Conference Board of Canada also predicted the pain would continue for the province, predicting a 1.5 per cent contraction this year. The debate over Alberta’s fortunes will be especially sharp today, with the expectation of Obama’s veto of Keystone XL, but more bills from Congress could be in the offing.

Will OPEC have an emergency meeting? Speaking of oil, it’s not just Alberta that has seen its fortunes turn as the price has dropped, but many OPEC members, who are desperate for the price to rebound. Nigeria’s oil minister says an emergency meeting could be in the works, months ahead of the group’s next scheduled meeting. The comments by Diezani Alison-Madueke highlight a key crack in the strategies of OPEC members, as Saudi Arabia looks unlikely to agree to a meeting, nor change production targets (still set at 30 million barrels a day), even as Nigeria, Russia and Venezuela have seen their economies buckling under the strain.

How good are tax-free savings accounts? Are they a useful savings tool or a drag on government finances? In a report from the Broadbent Institute, the author calls the accounts a “ticking time bomb,” saying a planned increase in the contribution ceiling for the accounts would result in lost taxes and would mainly help wealthier Canadians. The critique is especially interesting as it comes from Jonathan Rhys Kesselman, who was one of the authors of an earlier report from the C.D. Howe Institute that was supportive of the accounts. His co-author remains firmly in the pro-TFSA camp. The government has said it would double the allowable contributions, up to $10,000-$11,000, and the change could be announced as early as the spring.

The European Commission gives the green light for Greece’s proposals. But not so fast—they still need the approval of the eurozone finance ministers. The Greek government had a midnight deadline for sending in the more detailed reforms and, despite earlier claims they had missed the deadline, they managed to slip just under the wire. A Commission official called the proposals, which were required to provide a more detailed breakdown of costs, “sufficiently comprehensive” and noted strong reforms on combatting tax evasion and corruption. But there are plenty of problems remaining: Not only the eurozone ministers, but the IMF and the European Central Bank still need to approve the proposals. Even if the extension of the 172-billon-euro bailout does go smoothly from now on, there’s a major hurdle: The new 7.2 billion euro in funds is tied to reforms and, until those reforms are in place, the government still has a problem with a lack of cash. For the real wonks among you, here’s a copy of the letter the Greek government sent.

The battle to pay with your phone. In the tech world, battles are the norm: There’s the battle to run a better ride-sharing service, the battle for a better electric car, and the battle for a car that doesn’t need a driver at all. While most of those have to do with cars, lest we forget, the Big Tech showdown continues on all fronts. Now Google is ramping up the pressure for a “mobile payment” showdown with Apple, after announcing plans for its own wallet technology to be auto-installed on certain Android phones. Apple launched Apple Pay last fall. The question now: Is there more money in taking a commission off the payment, selling your users’ purchase data, or both?

Need to know:
TSX: 15,200.26 (+28.02), Monday
Loonie: 79.52 (+0.19), Monday
Oil (WTI): $49.70, Friday morning (7:30 a.m.)


 

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