Good morning. The Bank of Canada’s monetary policy announcement this morning hinges on two pressures pulling in opposite directions: cooling inflation and rising unemployment. That’s in focus today, along with a look at how long the Magnificent 7 stocks can live up to their name.
Up first
In the news
Mining: Teck Resources Ltd. is pledging to build a critical-minerals refining powerhouse in Southern British Columbia if the federal government approves its proposed merger with Anglo American PLC.
Government: Finance Minister François-Philippe Champagne says the federal government will table a budget on Nov. 4, offering Canadians the first glimpse into the state of public finances in nearly a year.
Trade: The U.S. has formally launched its review of the North American free-trade pact, setting the stage for months of intense negotiations.
- Last night, the U.S. ambassador to Canada said the Trump administration had hoped to “negotiate a bigger deal” with Canada rather than simply renewing the United States-Mexico-Canada Agreement. He didn’t explain why that wasn’t possible.
On our radar
- The Bank of Canada announces its overnight lending decision at 9:45 a.m. EST
- The U.S. Federal Reserve follows at 2 p.m.
- The Blue Jays’ magic number to clinch the AL East is 6.
A shopper at a Vancouver grocery store. Eating our vegetables is getting to be an expensive habit.DARRYL DYCK/The Canadian Press
In focus
Twin pressures, one decision
Coming off the upheaval of the global financial crisis and then the pandemic, the Bank of Canada’s routine agreement renewals with the federal government contained something new. For the first time, the text spelled out that monetary policy should not only keep inflation low and stable but also support “maximum sustainable employment.”
A joint statement in December, 2021, stopped short of the dual mandate written into the U.S. Federal Reserve’s charter, but the announcement signalled that Ottawa and the bank were alive to a broader set of risks – that inflation and jobs would need to be weighed together, even if the tools for managing them were blunt.
Today, those twin pressures are making for a delicate decision for Governor Tiff Macklem. Inflation remains stubbornly above target, which would normally support holding rates steady. But the latest jobs report showed a labour market under strain, with rising unemployment tied to trade disruptions and broader economic weakness.
Sticky. Icky?
Canada’s inflation rate edged up to 1.9 per cent in August from 1.7 in July, a modest rise that CIBC economist Andrew Grantham described as “largely unthreatening.”
Measures the bank uses to track underlying inflation – once volatile items such as gas are stripped out – stayed close to 3 per cent. Economists have been describing underlying inflation as “sticky” in recent months, with essentials such as food and shelter slower to ease, keeping overall inflation elevated.
Shelter relief, grocery pain
Shelter and food prices are moving in opposite directions. Mortgage interest eased to 4.2 per cent in August and rent growth slowed to 4.5, a sign that earlier rate cuts are starting to flow through. Capital Economics’ Stephen Brown said shelter costs were “unusually soft” in August, as falling new home prices offset higher rents.
Food purchased from stores, however, rose 3.4 per cent from a year earlier, led by meat at more than 7 per cent higher. This category alone makes up about 10 per cent of the Consumer Price Index basket, and because groceries are among the prices people watch most closely, it carries particular weight in the bank’s thinking.
Strains in the job market
Unemployment climbed to 7.1 per cent in August after two straight months of losses – 66,000 jobs gone on top of 41,000 in July. Most of the decline came in part-time work, but full-time hiring has slowed as well – giving way to a softer employment picture that weighs on wage growth and consumer demand. The Canadian labour market has been a sore spot for years, owing first to rising interest rates, and more recently because U.S. President Donald Trump’s trade war has chilled hiring and investment plans.
Recovery ahead?
The economy shrank at a 1.6-per-cent annualized pace in the second quarter of 2025, a recent Statscan report shows, as U.S. tariffs hit Canadian exports of steel, autos and other goods. Fewer shipments crossing the border dragged GDP lower even as household spending held up.
July offered some relief, according to the report: manufacturing, exports and wholesale trade all posted gains, hinting at a rebound in the third quarter, which runs through the end of September. In a report drawing from RBC’s cardholder data, economist Rachel Battaglia said inflation excluding autos and gas was moving in the right direction.
“We believe Canada’s economy will resume slow, but positive, GDP growth after a Q2 decline with relatively resilient consumer spending offsetting persistent headwinds in the industrial sector,” Battaglia wrote in a research note yesterday.
A tale of two banks
The U.S. Federal Reserve will follow later today with its own decision, also widely expected to be a cut. Moves in Washington ripple north through trade, investment and currency markets, but the backdrop for today’s double feature is split: Canada is contending with steeper trade damage and higher unemployment, while the Fed faces stronger growth, stickier inflation and open political pressure.
- Bank of Canada and U.S. Fed expected to resume rate cuts
- Lisa Cook to attend Fed meeting after appeals court ruling; Stephen Miran confirmed to open seat
Charted
A magnificent mystery
What should retirees do with their exposure to the Magnificent 7? The rise of the tech giants’ stock may or may not be a bubble. The only certainty, Frederick Vettese writes, is that the gains of the past 15 years cannot be duplicated over the next 15 years.
Bookmarked
On our reading list
Red tape: How bureaucratic processes are slowing down the rollout of new technology products for the country’s air force.
First person: In praise of the recorder, which is neither ‘Satan’s flute’ nor useless.
Appreciation: Robert Redford, a hero of Hollywood and an industry-bucking maverick like no other.
Morning update
Global markets traded near record highs ahead of interest rate announcements by the U.S. Federal Reserve and the Bank of Canada.
Wall Street futures were little changed, while TSX futures pointed lower after major North American markets closed down yesterday.
Overseas, the pan-European STOXX 600 was up 0.07 per cent in morning trading. Britain’s FTSE 100 gained 0.26 per cent, Germany’s DAX advanced 0.06 per cent and France’s CAC 40 was flat.
In Asia, Japan’s Nikkei closed 0.25 per cent lower, while Hong Kong’s Hang Seng rose 1.75 per cent to a four-year high on AI optimism and hopes of a U.S. TikTok deal.
The Canadian dollar traded at 72.67 U.S. cents.