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Bank of Canada signals further cuts as interest rates fall to 4.25%

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Bank of Canada signals further cuts as interest rates fall to 4.25%

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The Bank of Canada has signalled that borrowing costs could fall further in the coming months, after rate-setters cut interest rates for the third time in a row on Wednesday.

The central bank lowered its benchmark interest rate by a quarter of a percentage point to 4.25 per cent, in line with expectations.

Its governor, Tiff Macklem, said after the decision that if inflation continued to fall back towards the central bank’s 2 per cent goal, then it was “reasonable to expect further cuts”.

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While inflation remains above rate-setters’ target at 2.5 per cent, growth has been weak for several quarters. The central bank expects inflation to fall to 2 per cent by the second half of 2025.

The unemployment rate has inched up to 6.4 per cent — nearly 2 percentage points higher than the record low set two summers ago.

The central bank’s decision comes against the backdrop of a pressing social and political issue: high housing costs.

Housing affordability has become a bellwether for Justin Trudeau’s Liberal government a year out from a national election.

Shortly after the announcement, Trudeau posted on social media that there was still a “lot of work to make life more affordable” for Canadians.

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“But this is a strong signal that we’re going in the right direction, and it’s welcome relief for a lot of people looking to buy a home,” he said on X.  

Taylor Schleich, a rates strategist at National Bank of Canada, told the Financial Times that the rate cuts were a low-stakes tactic aimed at reducing mortgage costs for Canadian homeowners. Schleich said rates were so high that it was still quite “easy” for rate-setters to continue to incrementally cut them.

“Decisions start to get a bit more finely balanced probably next year,” he said.

While the central bank could move in bigger increments should growth come in lower than anticipated, Macklem indicated that the lender was likely to stick with smaller cuts.

“We will be assessing the data as it comes out,” the governor told the media. “If we need to take a bigger step, we are prepared to take a bigger step. At this point, 25 basis points looks appropriate.”

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Tony Stillo, director of economics for Canada at Oxford Economics, said: “We think this means larger 50 basis-point cuts are off the table for now.” 

The latest Canadian rate cut comes amid expectations that the US Federal Reserve will lower borrowing costs for the first time in four years at its September 18 vote.

Other G7 central banks including the Bank of England and the European Central Bank have already started to reduce rates amid signs that the worst bout of inflation for a generation is over.

Carolyn Rogers, a deputy governor at the central bank, told reporters on Wednesday that Canada’s rapid population growth had had a big effect on the economy.  

“The Canadian economy is having trouble absorbing the number of workers into jobs,” she said. “We haven’t seen a big increase in unemployment but we have seen vacancies come down and we are seeing the unemployed rate tick up a bit.”

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Last week, Trudeau announced measures to tighten Canada’s foreign workers programme.

While the programme is credited with helping Canada recover from the pandemic, it has been blamed for the high cost of housing, pressure on the healthcare system and rising youth unemployment.

Canada has added more than 1.6mn citizens since 2018, according to official data. The number of non-permanent residents in the country —  a figure that includes temporary workers, international students and asylum seekers — has more than doubled from about 1.3mn in 2021 to nearly 2.8mn in the second quarter of this year, Statistics Canada data shows.

“It is something we are watching closely,” Rogers said. 

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Trump claims US stockpiles mean wars can be fought ‘forever’; Kristi Noem testifies before Congress – US politics live

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Trump claims US stockpiles mean wars can be fought ‘forever’; Kristi Noem testifies before Congress – US politics live

Trump says US stockpiles mean “wars can be fought ‘forever’”

In a late night post on Truth Social, Donald Trump said that the US munitions stockpiles “at the medium and upper medium grade, never been higher or better”.

He added that the US has a “virtually unlimited supply of these weapons”, meaning that “wars can be fought ‘forever’”.

This comes after Trump said that the US-Israel war on Iran could go beyond the four-five weeks that the administration initially predicted. The president also did not rule out the possibility of US boots on the ground in Iran during an interview with the New York Post on Monday.

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“I rebuilt the military in my first term, and continue to do so. The United States is stocked, and ready to WIN, BIG!!!,” he wrote.

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Key events

During his opening remarks, Senate judicicary committee chairman, Chuck Grassley, blamed Democrats for the ongoing shutdown Department of Homeland Security (DHS) but highlighted four agencies: the Secret Service, Federal Emergency Management Agency (FEMA), the Transportation Security Administration (TSA), and the Coast Guard.

Democrats are demanding tighter guardrails for federal immigration enforcement, but a sweeping tax bill signed into law last year conferred $75bn for Immigration and Customs Enforcement (ICE), which means the agency is still functional amid the wider department shuttering.

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Supreme Court blocks redrawing of New York congressional map, dealing a win for GOP

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Supreme Court blocks redrawing of New York congressional map, dealing a win for GOP

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Win McNamee/Getty Images

The Supreme Court on Monday intervened in New York’s redistricting process, blocking a lower court decision that would likely have flipped a Republican congressional district into a Democratic district.    
  
At issue is the midterm redrawing of New York’s 11th congressional district, including Staten Island and a small part of Brooklyn. The district is currently held by a Republican, but on Jan. 21, a state Supreme Court judge ruled that the current district dilutes the power of Black and Latino voters in violation of the state constitution.  
  
GOP Rep. Nicole Malliotakis, who represents the district, and the Republican co-chair of the state Board of Elections promptly appealed to the U.S. Supreme Court, asking the justices to block the redrawing as an unconstitutional “racial gerrymander.” New York’s congressional election cycle was set to officially begin Feb. 24, the opening day for candidates to seek placement on the ballot.  
  
As in this year’s prior mid-decade redistricting fights — in Texas and California — the Trump administration backed the Republicans.   
 
Voters and the State of New York contended it’s too soon for the Supreme Court to wade into this dispute. New York’s highest state court has not issued a final judgment, so the voters asserted that if the Supreme Court grants relief now “future stay applicants will see little purpose in waiting for state court rulings before coming to this Court” and “be rewarded for such gamesmanship.” The state argues this is an issue for “New York courts, not federal courts” to resolve, and there is sufficient time for the dispute to be resolved on the merits. 
  
The court majority explained the decision to intervene in 101 words, which the three dissenting liberal justices  summarized as “Rules for thee, but not for me.” 
 
The unsigned majority order does not explain the Court’s rationale. It says only how long the stay will last, until the case moves through the New York State appeals courts. If, however, the losing party petitions and the court agrees to hear the challenge, the stay extends until the final opinion is announced. 
 
Dissenting from the decision were Justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson. Writing for the three, Sotomayor  said that  if nonfinal decisions of a state trial court can be brought to highest court, “then every decision from any court is now fair game.” More immediately, she noted, “By granting these applications, the Court thrusts itself into the middle of every election-law dispute around the country, even as many States redraw their congressional maps ahead of the 2026 election.” 

Monday’s Supreme Court action deviates from the court’s hands-off pattern in these mid-term redistricting fights this year. In two previous cases — from Texas and California — the court refused to intervene, allowing newly drawn maps to stay in effect.  
  
Requests for Supreme Court intervention on redistricting issues has been a recurring theme this term, a trend that is likely to grow.  Earlier last month  the high court allowed California to use a voter-approved, Democratic-friendly map.  California’s redistricting came in response to a GOP-friendly redistricting plan in Texas that the Supreme Court also permitted to move forward. These redistricting efforts are expected to offset one another.     
   
But the high court itself has yet to rule on a challenge to Louisiana’s voting map, which was drawn by the state legislature after the decennial census in order to create a second majority-Black district.  Since the drawing of that second majority-black district, the state has backed away from that map, hoping to return to a plan that provides for only one majority-minority district.    
     
The Supreme Court’s consideration of the Louisiana case has stretched across two terms. The justices failed to resolve the case last term and chose to order a second round of arguments this term adding a new question: Does the state’s intentional creation of a second majority-minority district violate the constitution’s Fourteenth and Fifteenth Amendments’ guarantee of the right to vote and the authority of Congress to enforce that mandate?    
Following the addition of the new question, the state of Louisiana flipped positions to oppose the map it had just drawn and defended in court. Whether the Supreme Court follows suit remains to be seen. But the tone of the October argument suggested that the court’s conservative supermajority is likely to continue undercutting the 1965 Voting Rights Act.   

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Map: Earthquake Shakes Central California

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Map: Earthquake Shakes Central California

Note: Map shows the area with a shake intensity of 3 or greater, which U.S.G.S. defines as “weak,” though the earthquake may be felt outside the areas shown.  All times on the map are Pacific time. The New York Times

A minor earthquake with a preliminary magnitude of 3.5 struck in Central California on Monday, according to the United States Geological Survey.

The temblor happened at 7:17 a.m. Pacific time about 6 miles northwest of Pinnacles, Calif., data from the agency shows.

As seismologists review available data, they may revise the earthquake’s reported magnitude. Additional information collected about the earthquake may also prompt U.S.G.S. scientists to update the shake-severity map.

Source: United States Geological Survey | Notes: Shaking categories are based on the Modified Mercalli Intensity scale. When aftershock data is available, the corresponding maps and charts include earthquakes within 100 miles and seven days of the initial quake. All times above are Pacific time. Shake data is as of Monday, March 2 at 10:20 a.m. Eastern. Aftershocks data is as of Monday, March 2 at 11:18 a.m. Eastern.

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