Good morning. The Donald Trump who wants lower interest rates is clashing with the Donald Trump escalating a war that risks driving inflation higher. That’s in focus today – plus, why Canada’s population dropped for the first time since the forties.
Up first
In the news
Alberta: The RCMP have executed search warrants as part of their investigation into procurement irregularities at Alberta’s health authority, a controversy that has dogged Premier Danielle Smith’s government for more than a year.
Mining: Teck Resources Ltd.’s royalty on Barrick Mining Corp.’s Fourmile gold project could be worth billions, potentially affecting Barrick’s IPO plans.
Finance: Canaccord Genuity Group Inc., the country’s largest independent investment bank, is reworking the leadership of its U.S. division in the wake of a US$80-million settlement with market regulators.
Trump walks across the South Lawn of the White House yesterday.Andrew Harnik/Getty Images
In focus
Fed holds steady as war blurs economic outlook
Donald Trump has run into a major hurdle in his efforts to convince the U.S. Federal Reserve to lower its key lending rate: Donald Trump.
Specifically, the version of Donald Trump who, alongside Israeli Prime Minister Benjamin Netanyahu, authorized a surprise attack on Iran last month – an escalation that has shut down major Middle Eastern oil fields and disrupted key shipping routes for crude and other commodities.
Brent crude has jumped 80 per cent this year, from US$60.24 to just over US$108 – a surge in the global benchmark that makes rate cuts harder to justify. Higher oil prices raise transportation and input costs across the economy, which can push up a wider range of goods and services.
In their policy announcements yesterday, the heads of both the Bank of Canada and the U.S. Federal Reserve said they were “looking through” those price rises and other volatile effects of the conflict. Earlier today, the Bank of Japan held its rate steady as the war adds to inflation pressures and clouds its outlook. The same is expected later this morning from the European Central Bank and the Bank of England as they wait for more economic clarity to emerge from the geopolitical turmoil.
The limits of ‘looking through it’
When economists say they’re “looking through” swings in prices or geopolitical shocks, that doesn’t mean they’re ignoring them. In commentary after their decisions, both Tiff Macklem and Jerome Powell said they would respond if elevated energy prices feed through into broader inflation.
Macklem said the risk of higher energy prices quickly spreading to other goods and services looks contained because inflation is near the bank’s target and businesses don’t have the customer demand to pass on higher oil costs.
Powell, too, might have had rosier things to say were it not for the fog of war. “The U.S. economy is doing pretty well,” he said. ”It’s just we don’t know what the effects of this will be, and really no one does."
That gets to the heart of the issue for the Trump who campaigned on ending U.S. involvement in “forever wars” as well as “defeating inflation.” Yesterday, ahead of the rate decision, Trump continued his Truth Social attacks on the Fed, which he blames for holding the economy back. “When is ‘Too Late’ Powell lowering INTEREST RATES?”
The answer to that largely depends on how the long the war lasts. The Trump who wants rate cuts might have had his wish a little sooner, were it not for the Trump who is now refusing to rule out boots on the ground in Iran.
The Fed projects one cut later in the year, but implied market odds after the announcement indicated investors aren’t expecting a move until the middle of 2027.
Waiting to exhale
In Canada, where inflation is near the central bank’s 2-per-cent target, the BoC has room to wait. But the U.S. has less flexibility, said Claire Fan, senior economist at the Royal Bank of Canada. An oil shock is landing on top of stubbornly high inflation. And yesterday, tariff-driven price pressures emerged to a surprising degree in producer costs, which didn’t even account the recent spike in oil prices.
Still, analysts said the central banks’ lending rates are where they ought to be. Relatively low lending levels are cushioning a soft economy in Canada; in the U.S., a “borderline restrictive” cost of borrowing is helping to bring inflation down, Fan said. For both countries, current rates may “reduce the urgency for the central banks to respond to higher near-term inflation.”
That’s not what Trump wants to hear. But perhaps the President will make his peace with a Fed soon to be under new management, firm in the belief that he has seized upon a chance to take out a threat far greater than higher prices. In a press release on Tuesday, White House press secretary Karoline Leavitt said the President had “strong and compelling evidence that Iran was going to attack the United States first.”
That statement was in response to the resignation of Joe Kent, the Trump administration’s top counterterrorism official, who voiced opposition to the war and claimed the President had been “duped.”
If it emerges that Trump knew something the country’s top counterterrorism official didn’t, history might be more forgiving than the current swell of frustration reportedly brewing inside the Republican Party and weighing on the President’s approval ratings.
In the meantime, the war on Iran has added an inflationary shock that central banks are designed to meet with caution. With mid-terms just over 200 days out, monetary policymakers might be able to look through a painful rise in oil prices. Voters might not.
Charted
Popped
Canada’s population declined by more than 100,000 in 2025, marking the first annual drop in records that date back to the 1940s. The fall is being driven by an exodus of temporary residents from the country, Vanmala Subramaniam reports – the result of a series of measures introduced by Ottawa in 2024 and 2025 to curb the number of non-permanent residents in the country.
Quoted
It means that the field of research that I initiated decades ago with Charles Bennett has finally received its most important international recognition.
— Gilles Brassard
Canadian computer scientist Gilles Brassard and a U.S. researcher, who together established the principles of quantum communication and encryption, were named this year’s recipients of the prestigious Turing Award in computer science.
Up next
More files we’re following
By the numbers: A range of economic measures reported in Canada today include the CFIB Business Barometer, Canadian construction investment and Canada’s household and mortgage credit.
At the bell: Notable earnings include Accenture PLC, Alibaba Group Holding ADR, FedEx Corp., Foran Mining Corp., Hammond Power Solutions Inc., Orla Mining Ltd. and Premium Brands Holdings Corp.
On the road: Alimentation Couche-Tard Inc. says it expects store traffic to rise at its Circle K stores in the U.S., despite surging prices at the pump.
Morning update
Global markets slid after a major escalation in the U.S. and Israel’s war with Iran rattled investors.
Wall Street futures edged lower, while TSX futures followed sentiment down.
Overseas, the pan-European STOXX 600 was down 1.81 per cent in morning trading. Britain’s FTSE 100 fell 1.9 per cent, Germany’s DAX dropped 2.11 per cent and France’s CAC 40 gave back 1.48 per cent.
In Asia, Japan’s Nikkei closed 3.38 per cent lower, while Hong Kong’s Hang Seng fell 2.02 per cent.
The Canadian dollar traded at 72.79 U.S. cents.