Good morning. The Bank of Canada announces on Wednesday whether it will cut or hold its benchmark lending rate as tariffs continue to cloud the country’s outlook. More below on what the bank makes of recent signs of strength - along with a quick look at the week ahead.
Today’s headlines
Trade: Ontario will strike agreements with Saskatchewan, Alberta and Prince Edward Island to reduce trade barriers between their provinces ahead of today’s first ministers’ meeting, which is expected to focus on fast-tracking major infrastructure projects and reducing red tape.
Taxes: The Federal Court has dismissed the CRA’s request for information about Shopify’s Canadian merchants, blocking efforts to crack down on undeclared income earned online.
Tech: Data centres are massive buildings filled with equipment for data storage, cloud computing and artificial intelligence. What you won’t find much of inside? People.
Mark Carney and Tiff Macklem walk along Ottawa's Sparks Street in 2013.Sean Kilpatrick/The Canadian Press
In focus
A challenge becomes a mandate
In his final official remarks as Bank of Canada governor in 2013, Mark Carney warned that Canada’s recovery from the Great Recession would stall without stronger business investment and a push to find new export markets.
Neither had been strong enough to carry the economy beyond the heavy lifting of stimulus, steady monetary policy, and debt-fuelled household spending, he told the Montreal Chamber of Commerce. “Is that the best we can do?”
On Wednesday, in the bank’s first rate announcement since Carney was elected Prime Minister, his former deputy might still be asking the same question.
Market watchers are pulling back expectations that Governor Tiff Macklem will cut the bank’s key rate after stronger-than-expected inflation and GDP data. But most still expect cuts this year, as the economy contends with U.S. tariffs and growing uncertainty.
“From the Bank of Canada’s perspective, it’s unfortunate that they have to adjust and make decisions in a period of time where it’s highly uncertain,” TD Bank economist Andrew Hencic told The Globe. “There’s going to be an element of data dependency in trying to forecast forward.”
More than a decade has passed since Carney stood before that Montreal crowd. The pandemic brought the global economy to a halt. Inflation surged. The central bank responded with its most aggressive rate hikes in a generation.
But Canada’s vulnerability today reflects more than the aftershocks of the pandemic. Growth has slowed, investment has lagged, and trade has become even more concentrated in the U.S. market.
Donald Trump may not be the trade partner Carney had in mind when he warned of “immense uncertainties” in the world economy, but the lesson was the same: “We need to focus on what we control,” he said. “We cannot save the euro or fix America’s fiscal challenges.”
Instead, he urged Canada to build new trade partnerships — and to invest in skills and productivity as a buffer against future shocks. “To keep Canada working,” he said, “we need to build.”
On Wednesday, both he and Macklem may still share that belief. And they may still wonder if this is the best we can do.
But only one of them will be remembered by millions of Canadians for a dramatic federal election that was won, in part, by turning that question into a promise.
On our radar
Ahead this week
Tomorrow
Euro-zone data could show headline inflation hitting the European Central Bank’s 2-per-cent target – just ahead of the bloc’s anticipated rate cut.
Target acquired? If inflation is back at target, the ECB might slow its rate cuts – affecting borrowing costs, corporate planning, and currency movements across global markets.
Wednesday
Australia reports GDP. Any upbeat reading is likely to be discounted as a prelude to April’s tariff disruption.
- Mirror, mirror: Australia’s commodity-driven economy offers an interesting point of comparison for Canada. In pointing out similarities in global resource demand and exposure to trade disruptions, particularly through ties to China, The Economist suggested a combined country would be called “Ozanada.” I suppose that’s better than Castralia.
Thursday
Canada’s international trade data are expected to show a wider deficit, with exports falling faster than imports.
- Trade-off: Imports into the U.S. plunged nearly 20 per cent in April after new tariffs took effect. Canada is partially insulated thanks to USMCA exemptions – but softer global demand and falling export volumes still widen the gap.
ECB president Christine Lagarde faces questions about future cuts – and her own future – as speculation builds over a possible move to oversee the World Economic Forum.
- What to watch: The ECB’s next steps will ripple through global bond markets. Lagarde’s potential exit could inject fresh uncertainty into euro-zone policy.
Friday
Economists are looking for Canada’s jobs report to show further weakness in industrial hiring – though online job postings suggest the broader market may be stabilizing.
- Holding pattern: Unemployment is expected to remain around 6.9 per cent. with little momentum one way or the other heading into the summer.
The U.S. jobs report is expected to show a hiring slowdown in May as investors weigh stagflation risks and dial back bets of a Fed rate cut.
- The bigger worry: Fewer new jobs and stubborn inflation would raise fears of a stagflation scenario – the worst of both worlds for workers, businesses and markets. U.S. labour market trends also push and pull on Canadian export demand.
Charted
A decline in civility
They’re far from DOGE-level numbers, Jason Kirby writes, but as the U.S. Department of Government Efficiency continues to slash America’s federal work force, Ottawa released numbers that show Canada shed nearly 10,000 federal civil servants over the last year, the first decline since 2015.
Bookmarked
On our reading list
Around the world: As Canada stares down the barrel of tariffs and a newly hostile United States, The Globe and Mail asks experts how to win a trade war.
Off the farm: Cattle have roamed the city centre of Cambridge, England, for hundreds of years. GPS is keeping the tradition going.
Breaking the bank: “What if the world ends?” And other reasons why young people aren’t saving their money.
Morning update
Global markets slipped as U.S.-China trade tensions bubbled and investors turned defensive ahead of U.S. jobs data and a widely expected cut in European interest rates. Wall Street futures were in the red, while TSX futures pointed higher as commodity prices climbed.
Overseas, the pan-European STOXX 600 was down 0.37 per cent in morning trading. Britain’s FTSE 100 inched down 0.04 per cent, Germany’s DAX declined 0.52 per cent and France’s CAC 40 gave back 0.65 per cent.
In Asia, Japan’s Nikkei closed 1.3 per cent lower, while Hong Kong’s Hang Seng slid 0.57 per cent.
The Canadian dollar traded at 73.01 U.S. cents.
Editor’s note: A previous version of this newsletter incorrectly stated that the federal court ruled that that Shopify Inc. must hand over six years’ worth of data for its Canadian merchants. The ruling stated that Shopify is not obligated to provide its merchants' data.