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U.S. Fed chair plays Scrooge as markets tumble following latest rate hike: Don Pittis

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With his long face and expressive grimaces, Federal Reserve chair Jerome Powell might have played a powerful Ebenezer Scrooge, the repentant anti-hero of Charles Dickens’s A Christmas Carol.

Certainly that is how stock markets seemed to see him yesterday after the U.S. central banker hiked rates for the fourth time this year.

Powell and his team of advisers did repent somewhat, saying there would likely only be two rate increases in 2019 instead of the anticipated three. But that apparently didn’t satisfy the Dow Jones Industrial average.

Markets rise then plunge

Initially, the markets went up after the central bank released its statement revealing that, as expected, it was raising rates again, for a total hike of one full percentage point for the year.

But as Powell responded to reporters’ questions in the news conference that followed, the Dow steadily declined by 700 points. By the end of the day, the index had hit its low for the year.

The decline was described as the worst response to a rate hike since 1994, when the Fed of that time raised rates 2.5 percentage points in a year.

However, it was not obvious exactly what the markets were responding to yesterday. Before the Fed announcement, most analysts said the rate hike was locked in and markets had already taken it into account.

In fact, the two-stage process of a Fed release seemed to confirm that was true. Immediately after the printed document  came out at 2 p.m., showing that rates would indeed go up by a quarter point, the market began to climb.

Some of the analysis before Powell’s release had warned there could be consequences if he decided not to raise rates. According to that thinking, pulling back from a rate hike now would show the Fed had real fears for the economy.

But as Powell revealed in his news conference, that was absolutely not the case.

“Our forecast for next year is, I think, in keeping with most other forecasts — that we’ll still have solid growth next year, declining unemployment and a healthy economy,” Powell said.

Recession not in the cards

While economic growth won’t be as strong as the bumper year gone by, with its flood of tax cuts and fiscal spending, the economy in 2019 will be nowhere near recession.

Based on the expectations of the bankers who sit on the open markets committee that advises Powell, the median rate of growth in 2019 will be a healthy 2.3 per cent. Unemployment is expected to fall to 3.5 per cent. Inflation will remain around two per cent — right on target.

The relationship between the economy and markets is a strange one. Clearly, a strong U.S. economy is essential to business in the long term.  

But it is well known that stock markets like low interest rates. In the short term, they may even prefer low rates to a strong economy. Since the 2008 credit crisis, each time the economy sagged and required interest rate cuts, the markets seemed to be the main beneficiary.

Markets don’t like it when central bankers take away the punch bowl. (Everett Collection/Shutterstock)

Bonds, too, shot up in value as interest rates fell. 

As that process reverses, it is clear the people who own those stocks and bonds are feeling the pinch. It really is the classic case of the central banker taking away the punch bowl, especially when people like U.S. President Donald Trump have made it clear they would like the party to continue.

Do the right thing

If Powell is Scrooge, then perhaps the U.S. president has been playing the role of Jacob Marley, constantly rattling his chains and warning that the central banker should change his ways.

In the news conference, reporters asked repeatedly, and in different ways, if Powell would cave to the president’s demands to stop raising rates. Each time his answer was the same. A firm no.

“Political considerations have played no role whatsoever in our discussions or decisions about monetary policy,” Powell said in one response, never once mentioning Trump’s name. “Nothing will deter us from doing what we think is the right thing to do.”

That does not mean Powell and his advisers will be inflexible. 

The Fed chair noted that Trump’s trade war is causing concern, although, so far, it’s difficult to tease that out in the financial data. The market declines, which Powell described as “financial tightening” and a “mood of angst,” could eventually have an effect on the wider economy.

But, like Trump’s outraged tweets telling Powell to desist, they could also be evidence of a painful process where speculative growth powered by easy money goes through an essential transition.

Future financial health depends not just on returns from rising asset prices due to low interest rates but on wise investments that create productive industries and well-paying jobs.

With luck, that is the transition we are going through now.

And if not, Powell and his advisers are ready to watch the data as it comes in and adjust the path of interest rates, following their mandate from Congress to try to keep employment and inflation on track in 2019.

Follow Don on Twitter @don_pittis

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Ottawa education workers still teaching special-ed students at schools want safety checks

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Some Ottawa educators say they are concerned about the safety of classrooms that remain open in schools for special-education students.

Ontario elementary and secondary students have been sent home to study virtually because of the dangers posed by rising rates of COVID-19. However, special-education classes are still operating at many bricks-and-mortar schools.

The special-education classes include students with physical and developmental disabilities, autism and behaviour problems. Some don’t wear masks and require close physical care.

Two unions representing teachers and educational assistants at the Ottawa-Carleton District School Board have sent letters to Ottawa Public Health expressing their concerns.

It’s urgent that public health officials inspect classrooms to assess the safety of the special-ed classes, said a letter from the Ottawa branch of the Ontario Secondary School Teachers’ Federation, which also represents the educational assistants who work with special-needs children.

“In the absence of reasons based on medical evidence to keep specialized systems classes open, we are unsure as to the safety of staff and students in these programs,” said the letter signed by president Stephanie Kirkey and other union executives.

The letter said staff agreed that students in specialized classes had difficulty with remote education and benefited most from in-person instruction.

“Our members care deeply about the students they work with and are not only concerned about their own health and safety, but also about that of their students, as they are often unable to abide by COVID safety protocols that include masking, physical distancing and hand hygiene, thus making it more likely that they could transmit the virus to one another,” the letter said.

The Ottawa-Carleton District School Board has 1,286 elementary and secondary students in special-education classes attending in person at 87 schools, said spokesperson Darcy Knoll.

While final numbers were not available, Knoll said the board believed a large number of the special-education students were back in class on Friday at schools.

In-person classes for other elementary and secondary students are scheduled to resume Jan. 25.

The school boards provide PPE for educators in special-education classes as required, including surgical masks, face shields, gloves and gowns.

Several educators interviewed said they don’t understand why it has been deemed unsafe for students in mainstream classes to attend class, but not special-ed students.

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Ottawa sets record of 210 new COVID-19 cases following lag in data reporting

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Ottawa has now broken its daily record for new COVID-19 cases twice in 2021, with 210 new cases added on Friday amid a lag in data reports from earlier in the week.

The nation’s capital has now seen 10,960 cases of the novel coronavirus.

Ottawa Public Health’s COVID-19 dashboard reports 977 active cases of the virus in Ottawa, a jump of more than 100 over Thursday’s figures.

One additional person has died in relation to COVID-19 in Ottawa, raising the city’s death toll in the pandemic to 395.

The record-setting case count comes a day after Ottawa reported a relatively low increase of 68 cases. Ontario’s COVID-19 system had meanwhile reported 164 new cases on Thursday.

OPH said Thursday that due to a large number of case reports coming in late Wednesday, the local system did not account for a large portion of cases. The health unit said it expects the discrepancy to be filled in the subsequent days.

Taken together, Thursday and Friday’s reports add 278 cases to Ottawa’s total, a daily average of 139 cases.

The new single-day record surpasses a benchmark set this past Sunday, when the city recorded 184 new cases.

Ontario also reported a new record of 4,249 cases on Friday, with roughly 450 of those cases added due to a lag in reporting in Toronto.

The number of people hospitalized with COVID-19 also continues to climb in Ottawa. OPH’s dashboard shows there are currently 24 people in hospital with COVID-19, seven of whom are in the intensive care unit.

Three new coronavirus outbreaks were added to OPH’s dashboard on Friday. One outbreak affects a local shelter where one resident has tested positive for the virus, while the other two are traced to workplaces and private settings in the community.

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Ottawa family dealing with mould issue in apartment grateful for support

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OTTAWA — An Ottawa family, who has been dealing with mould in their south Ottawa apartment, is grateful for the support they have received from the community.

“I would like to say big very mighty, big thank you to everyone,” says Nofisat Adeniyi.

Adeniyi lives with her three sons in a South Keys apartment. Her son Desmond turned to social media on Sunday to seek help for the family, saying they’ve been dealing with mould in their unit and it has taken too long to fix.

“I see my mom go through a struggle everyday; with three kids, it’s not easy,” says 16-year-old Desmond Adeniyi.

He setup a GoFundMe page to help the family raise money to move out. After gaining online attention and the story, which originally aired CTV News Ottawa on Tuesday, they have been able to raise over $30,000.

“Yes! I was surprised, a big surprise!” says Nofisat Adeniyi, “We are free from the mess that we’ve been going through.”

The family was so touched, they decided to pay it forward and donated $5,000 to another family in need, “A lady my son told me about,” says Nofisat Adeniyi.

The recipient wants to remain anonymous, but when she found out from Adeniyi, “She was crying, she has three kids; I remember when I was, I can feel what she’s feeling – because I was once in those shoes.”

CTV News Ottawa did reach out to the property management company for an update on the mould. In a statement on Wednesday, a spokesperson for COGIR Realty wrote:

“We respect the privacy of our residents and are unable to disclose any specific information regarding any of our residents. We can, however, let you know that we are working with the residents and are making every effort to resolve this matter as soon as possible,” said Cogir Real Estate

The giving did not stop at just cash donations. “When I saw the segment, the thing that struck me the most was how easily the situation can be resolved,” says mould removal expert Charlie Leduc with Mold Busters in Ottawa.

Leduc is not involved in the case, but appeared in the original story, and after seeing the mould on TV wanted to help.

“This isn’t something that we typically do, but given the circumstance and given the fact that this has gone on way too long, our company is willing to go in and do this work for free,” said Leduc.

The Adeniyi family may now have some options, and are grateful to the community for the support.

“Yes, It’s great news — you can see me smiling,” says Nofisat.

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