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Hopes of making it a week without any new tariff news were dashed on Wednesday when President Donald Trump announced a 25% tariff on motor vehicle and parts imports from April 3 rd . Despite accounting for 10% of Canada’s goods exports to the US, the hit …
28th March 2025
Inflation at risk of takeoff On Tuesday we learned that headline inflation jumped to 2.6% in February, from 1.9%. While a rise had been expected given the resumption of GST in the middle of last month, broader price increases elsewhere in the economy …
21st March 2025
Trump torments Tiff The Bank of Canada’s decision to lower its policy rate by a further 25bp, to 2.75%, at its meeting on Wednesday was largely expected given the growing downside risks to the economy from US tariffs. While the temporary carveout …
14th March 2025
The US tariff exemption for USMCA-compliant goods still leaves considerable uncertainty for the economy because less than 40% of exports to the US last year were formally USMCA compliant. The share that could be quickly declared USMCA-compliant is likely …
7th March 2025
Economy doing well ahead of tariff threats Fourth-quarter GDP growth of 2.6% annualised was much stronger than the 1.8% rate we and the Bank expected, while third-quarter growth was revised up to 2.2%, from the initially reported 1.0%. As a result, growth …
28th February 2025
Underlying inflation picks up Headline inflation rose to 1.9% in January, from 1.8%, despite the partial GST/HST holiday that began in mid-December. (See here .) Excluding taxes, headline inflation climbed to 2.5%, providing a taste of what is to come now …
21st February 2025
Bank of Canada navigating without tariff roadmap The Summary of Deliberations from the Bank of Canada’s January policy meeting confirmed that tariff uncertainty had a hand to play in its decision to cut interest rates by 25bp. In particular, members of …
14th February 2025
The announcement and subsequent postponement of tariffs on Canada by President Donald Trump has sprung politicians into action. On Wednesday, Liberal Party leader hopefuls Mark Carney and Chrystia Freeland set out their economic policies. Today, Prime …
7th February 2025
Despite the best efforts of the Canadian government to convince US officials that the border is secure, President Trump reiterated on Thursday that his administration will impose a 25% tariff on imports from Canada this Saturday. That would be a big blow …
31st January 2025
An especially ‘Blue Monday’ for Canadians President Trump used his first week (back) in office to double down on threats to impose a 25% tariff on imports from Canada, with the added detail that this could come into effect on February 1 st . As we …
24th January 2025
The federal government is planning to fight US tariffs with tariffs, but reports this week suggest that those would cover a far smaller value of goods than the US is likely to hit. The government has also failed to muster enough support from the …
17th January 2025
The power vacuum created by Prime Minister Justin Trudeau’s resignation comes at a bad time, with President-elect Donald Trump ratcheting up his threats against Canada, raising the risk that the next government will be parachuted onto the front lines of a …
10th January 2025
Frosty atmosphere at the top Forty years on from his father famously resigning as Prime Minister following a solo walk through an Ottawa snowstorm, reports suggest Justin Trudeau is mulling the same decision after a tumultuous week within government. The …
20th December 2024
Bank of Canada signals caution The Bank continued its easing cycle this week with another 50bp cut, taking the policy rate down to 3.25%. While that was widely expected, the hawkish tone of the policy statement prompted investors to pare back expectations …
13th December 2024
Pick-up in the survey indicators Recent Bank of Canada communications have been keenly attuned to the downside risks to inflation and economic activity, concerns which seemed justified after last week’s disappointing GDP report, which showed third-quarter …
6th December 2024
US President-elect Donald Trump’s pledge this week to levy a 25% tariff on all products imported from Canada is clearly more of a bargaining tool than a genuine threat. However, it is now apparent that the USMCA will not spare Canada from Trump’s wrath. …
29th November 2024
The recent stronger price and activity data, along with the announcement this week of a sales-tax break over the festive period and stimulus cheques to come next year, means we now think the Bank of Canada will cut interest rates by 25bp at its December …
22nd November 2024
The US election outcome means that Canada and the US will not be trading friendship bracelets anytime soon and leaves the risks to inflation more finely balanced, but we still think that growth concerns will prompt the Bank of C anada to cut the policy …
15th November 2024
Clearer window into policymakers’ minds While the Summary of Deliberations from the Bank of Canada’s October meeting didn’t give much away about the size and pace of further interest rate cuts, we did learn more about policymakers’ aims. The Bank has …
8th November 2024
While there were some positives to take from this week’s GDP data release, it still points to an economy stuck in a period of below potential growth. This reinforces our view that the Bank of Canada will cut by 50bp again in December. Third-quarter GDP …
1st November 2024
Bank steps up the pace of loosening The Bank’s shift to a larger interest rate cut this week, which took the policy rate down to 3.75% (see here ), created some confusion among commentators. Some wondered why the Bank felt the need to act more …
25th October 2024
All systems go on 50bp A string of soft data releases this week should give the Bank of Canada the necessary confidence to step up the pace of monetary easing at its meeting next week. September’s CPI report , on Tuesday, showed headline inflation at 1.6% …
18th October 2024
The stronger labour market data makes the Bank of Canada’s decision in October a close call but, with upside inflation risks fading, and demand still very weak, we think the Bank will want to bring interest rates to a more neutral stance relatively …
11th October 2024
Home sales struggling to keep up with listings The local real estate board data released this week showed that the housing market is still struggling despite the recent fall in mortgage rates. It was positive to see sales in Toronto grow by a stronger …
4th October 2024
Worrying signs in the CFIB Business Barometer Although the CFIB Business Barometer covers only small firms, in recent years the survey indicators have provided a fairly accurate steer to economic conditions. The headline index fell to 55.0 in September …
27th September 2024
Bank to step up the pace of easing The Summary of Deliberations from September’s policy meeting, published on Wednesday, revealed that the Bank of Canada is placing increasing emphasis on the downside risks to inflation and activity. Some on the Governing …
20th September 2024
The sharp rebounds in both residential and non-residential building permit issuance in July eased concerns that the construction sector is about to take a turn for the worse. Risks remain, however, particularly for residential construction in Toronto. …
13th September 2024
The communications from the Bank of Canada this week suggest that the rise in the unemployment rate in August is unlikely to be enough to trigger larger interest rate cuts, which is probably a sign that the Bank is comfortable with the extent of loosening …
6th September 2024
Second-quarter GDP growth surprised to the upside of the Bank of Canada’s forecast, but the evidence that growth slowed sharply over the quarter suggests that third-quarter growth will be much weaker than the Bank is anticipating. That raises the chance …
30th August 2024
The muted gains in the Bank of Canada’s preferred core price measures in July make another interest rate cut at the September meeting seem inevitable. The Bank will be encouraged by the second soft monthly gain in rents, which may be a sign that we have …
23rd August 2024
The data this week cast doubt on the Bank of Canada’s view that the worst is already behind us for the economy, with manufacturing sales slumping to a two-and-a-half year low in June and non-residential building permit volumes plunging to their lowest …
16th August 2024
With the Summary of Deliberations this week confirming that the Bank of Canada is putting more weight on the downside risks, we feel confident that the Bank will continue to cut interest rates at each remaining meeting this year. Still, with wage growth …
9th August 2024
The data this week suggested that second-quarter GDP growth was a touch stronger than expected at 2.1% annualised. We expect higher oil export capacity and strong immigration to prevent a sharp slowdown this year, but with neither tailwind preventing …
2nd August 2024
The Bank of Canada was already first off the mark compared to other G7 central banks and the second 25bp interest rate cut this week, to 4.50%, puts it further ahead in its loosening cycle. Governor Tiff Macklem said in his opening statement that “we are …
26th July 2024
Despite some measures of monthly core price growth remaining above the rates consistent with 2% inflation, the June CPI release on the whole supported the case for another interest rate cut from the Bank of Canada next week. Downward trend in inflation …
19th July 2024
The latest housing market data paint an almost ideal picture for the Bank of Canada, with activity improving, but little sign of a surge in house prices that could derail the downward trend in core CPI inflation. Home sales finally turning a corner The …
12th July 2024
Still elevated wage growth is partly due to earlier large gains in public sector pay, which are unlikely to be repeated. There are tentative signs that private sector wage growth is slowing, and the wider evidence suggests this process should gather pace …
11th July 2024
There was little to be encouraged by this week, with labour market conditions continuing to soften, the business surveys weak and the real estate board data pointing to a risk of renewed falls in house prices. All that makes it more likely that the Bank …
5th July 2024
The May CPI data were a step back after the run of soft core price readings in the first quarter. The broader evidence stills seems supportive of a July interest rate cut, but the next CPI release for June, to be released in the run up to that meeting, …
28th June 2024
The Summary of Deliberations from the Bank of Canada’s June meeting reiterated that further interest rate cuts are likely but gave little away about how quickly the Bank will move. With another two CPI releases before the July meeting, our sense is that …
21st June 2024
The household debt-to-income ratio fell again in the first quarter, albeit because incomes continued to rise at a faster pace than debt levels. Although the aggregate situation is slowly improving, many households are still in a precarious situation, …
14th June 2024
The Bank of Canada kicked off its loosened cycle this week and the accompanying communications left the door open for another cut in July, although still-strong wage pressures are one reason why the Bank may opt to take a more gradual approach. “Let’s …
7th June 2024
The weaker-than-expected first-quarter GDP data and downward revision to fourth-quarter growth caused markets to price in a higher chance that the Bank of Canada will cut interest rates next week. With consumption growth strong, however, we still think …
31st May 2024
The further fall in headline inflation in April, to a three-year low of 2.6%, means the 2% target could be achieved as soon as August. Whether the Bank of Canada cuts interest rates in a couple of weeks or waits until July, our key message is that the …
24th May 2024
The further evidence of softer activity this week might not be enough to persuade the Bank of Canada to cut interest rates in June, but they add to our sense that rate cuts are coming very soon. Momentum fading going into Q2 The recent data suggest that …
17th May 2024
The strength of the April labour market data means we now expect the Bank of Canada to begin its loosening cycle in July, rather than June. Nonetheless, the sharp growth in labour supply and moderation in wage growth means we remain confident in our view …
10th May 2024
After 12 long years, the Trans Mountain oil pipeline expansion finally entered commercial service this week. The pipeline has the potential to raise oil exports significantly, but the full boost is unlikely to be felt for some time. The project increases …
3rd May 2024
The latest Summary of Deliberations showed division among the Governing Council about when it will be appropriate to cut interest rates. The data released since the April meeting favour the doves, however, so we are sticking to our view that the first cut …
26th April 2024
Budget 2024 made a bit of a splash thanks to the unexpected changes to capital gains taxes, but we do not think the new net spending measures were large enough to change the outlook for GDP growth or interest rates this year. The encouraging March CPI …
19th April 2024
Finance Minister Chrystia Freeland’s pledge to create the conditions needed for lower interest rates means the government is unlikely to announce much new near-term spending in Budget 2024 next week. Providing that core inflation pressures remain muted, …
12th April 2024
