GDP growth looks to have lost some momentum in the third quarter, and headwinds from new tariffs and ongoing CUSMA uncertainty will weigh on activity over the next few quarters. While most measures of core inflation remain consistent with the 2% target, high energy prices and a rise in households’ long-term inflation expectations risk triggering second-round inflation effects. We now expect the Bank of Canada to hike the policy rate by 25bp at its October meeting, though we still think investors have gone too far in pricing in ~100bp of rate hikes by end-2027.
We will be reacting to the Bank of Canada meeting in an online briefing at 5pm GMT/1pm ET on Wednesday 28th. Register here.
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