Economy and Markets

Canada’s economic growth challenges are expected to ease as the Bank of Canada continues to lower interest rates—but not right away, and longer-run challenges remain.

International trade risks are back in focus as the incoming Trump administration prepares to take office—but for now, economic data is tracking broadly in line with prior expectations.

U.S. government spending will continue to add to growth, but it may come at the cost of higher inflation, interest rates, and less savings for the future.

The stronger-than-expected September U.S. payroll report left the economy on track for the historically elusive ‘soft landing’ and reduced urgency for the Fed to repeat a 50-basis point rate cut.

The Canadian economy has continued to underperform global peers with declines in per-capita output in seven of the last eight quarters.

Softening U.S. labour markets and lower inflation leave the Fed on track to kick of an easing cycle starting in September, one of the last major central banks to do so.

More central banks are committing to cutting interest rates from elevated levels.

We now expect the Fed to cut rates in September—earlier than our prior December assumption—with a gradual easing cycle to follow.

Bank of Canada and ECB both kickstarted the easing cycles in June but neither is expected to race rates to the bottom.

The global economic growth backdrop has shown signs of improvement, but Canada’s economy continues to underperform.

Upside inflation surprises year-to-date in the U.S. will keep the Fed on the sidelines for now – we continue to expect the first cut to the fed funds target in December, contingent on both growth and inflation gradually and persistently slowing.

A resilient U.S. economy and signs of reacceleration in inflation look likely to derail Fed plans to cut interest rates by 75 basis points this year – we now look for just one 25 basis point cut in December.