Tuesday 27 October 2026

A Bank of Canada hike to 2.50% tomorrow is more likely than not, but it is a closer call than the market odds suggest, because the Bank would be tightening into falling employment. We expect a quarter point described as insurance against energy-driven inflation expectations, with the Monetary Policy Report revising inflation up and growth down.

Why we think so. The case for a hike rests on inflation and, above all, on expectations. September CPI rose 3.1%, up from 3.0% in August and above the 1% to 3% band, with gasoline up 27.8% from a year earlier, and the Bank’s own surveys show inflation expectations rising sharply. Once households and businesses expect higher prices, they build them into wages and contracts, which is how a temporary energy shock becomes lasting inflation. That is the risk a central bank is least willing to take. The case against is a weak economy: 68,000 jobs lost in September, unemployment at 6.5%, and CPI ex-gasolineCPI ex-gasoline The Consumer Price Index with gasoline removed. When it sits well below the headline rate, the inflation is coming from fuel rather than from the broad economy. at only 2.2%. Those figures argue against a sequence of moves. BMO’s Benjamin Reitzes summed up the Bank’s likely reasoning as preferring the mistake of hiking a little too early. A single hike with cautious language reconciles the two, which is why the language matters more than the quarter point.

What the market is pricing. The shift has been fast. Interest-rate futures moved from about a 30% chance of a hike a few weeks ago to roughly three in four, and MoneySense and the Financial Post put the odds near 80%. In the Reuters poll, 19 of 34 economists (56%) expected a hike, and 16 of 29 expected a second to 2.75% by the end of March, while the previous poll had 80% calling for no change through 2026. We agree with the direction, but the economists’ split shows more doubt than the futures do, and dissenting economists cite exactly the mix of rising inflation and falling jobs.

What it means. For anyone with a variable-rate mortgage or a home equity line of credit, a 25 basis point hike flows to the lender’s prime rate within days, and the payment or the amortization moves with it. MoneySense notes the lowest five-year variable is about 3.43% and would sit near 3.7% after a quarter point. The useful step before 06:45 PT tomorrow is to work out what a 0.25% and a 0.50% rise would do to the monthly payment on all variable-rate debt, so the decision is arithmetic already done. A cash buffer that covers two hikes rather than one is the safer plan. Business owners with a floating operating line will see the cost of carrying inventory rise by the same quarter point. Savers can expect high-interest savings and short GIC rates to edge up, which makes a short GIC ladder worth comparing against waiting.

What would change our mind. A hold tomorrow, or a hike with language that explicitly points to further increases, would show we have misread the Bank’s balance between inflation expectations and the labour market.

What to watch. The overnight rate decision and Monetary Policy Report at 06:45 PT on Wednesday 28 October. The U.S. Federal Reserve’s meeting, which begins today, with its decision on Wednesday at 11:00 PT.

For a household, the question this listing raises is not whether the company succeeds, but whether a single new issue deserves a place in a diversified portfolio at a price set by the most enthusiastic bidders on the first day. Over the years that follow, first-day buyers of large IPOs rarely do better than the index.

Why we think so. The filing shows the two faces of a growth-stage company. Revenue was US$16.3 billion in the first half of 2026, against US$1.16 billion a year earlier. The net loss was US$80.7 billion, but about US$72.4 billion of that is a non-cash charge from revaluing convertible notes as the company’s valuation rose; the operating loss was US$693 million, and the company held US$112.4 billion in cash at 30 June. Alongside that growth come very large commitments, including one equipment lease that calls for about US$125 billion in rent over five years, and a share structure that leaves the founders with voting control. None of that makes the company a good or bad business. It means the price at listing will carry a great deal of optimism, and buyers on day one pay for it in full.

How this has played out before. Large, heavily publicized offerings tend to price at levels that reward early private investors and the most eager public buyers, and enthusiasm on the first day often fades as more shares become available and results are measured against high expectations. Investors who bought broad index funds have, over long periods, usually done at least as well, with far less concentration. The backdrop adds to the risk: on Monday the Nasdaq rose 0.82% to 26,169.38 and the S&P 500 0.70% to 7,676.80, with markets pricing only about a 10% chance of a Fed hike, so equities are already priced for a calm Fed and strong technology earnings, leaving little room for disappointment.

What it means. Canadian investors will be able to buy this listing in a brokerage account soon after pricing. Anyone considering any IPO can decide in advance the dollar amount, as a share of the portfolio, that could be lost entirely without harming the plan, and write it down before the marketing begins. It also helps to remember that a technology-heavy index fund already carries large AI exposure, so a new listing on top of it is a decision about how much retirement savings should depend on one theme.

What would change our mind. If the offering were priced at a clear discount to the last private round, which the filing does not yet indicate, the case for first-day buyers would be stronger and we would revise our view.

What to watch. The share count and price range, not yet set. Marketing to investors, which press reports suggest could begin the week of 9 November. Microsoft, Alphabet and Amazon results this week, and the Fed’s decision on Wednesday.

A framework trade agreement with the United States before the U.S. midterm campaign is plausible, because both governments now want one. But the truck and steel details that sank the August round are unresolved, and they could sink this one too.

Why we think so. The tone has changed. Prime Minister Carney said there has been a slight intensification in discussions, after President Trump and White House adviser Kevin Hassett said over the weekend that a deal was close. When both sides speak positively at once, it usually means each sees a political benefit in an agreement. The substance has not changed as much. Talks broke down on 21 August, after which the U.S. put 50% tariffs on roughly $20 billion of Canadian goods and Canada retaliated on a similar value of American products. Bloomberg reports the August U.S. offer would have kept tariffs on steel, aluminum and autos at reduced rates, and that the round collapsed partly over whether relief would extend to medium and heavy-duty trucks. Carney says Canada has clear red lines, was not willing to sign what was on the table in August, and that any movement since has come from the U.S. side. A U.S. official told Bloomberg that Washington does not think Canada is offering enough yet. Both statements can be true, and they describe a gap, not a deal. No deadline has been set.

The bigger picture. Trade negotiations often produce a positive framework well before the hard details are settled, and the details are where sectoral tariffs live. For Canada, the outcome on steel, aluminum, autos and trucks matters more than any headline agreement. The trade file is also one of the two forces, with oil, holding the Canadian dollar near 71.3 U.S. cents and keeping the Bank of Canada cautious about how far it can tighten.

What it means. For an exporter or a manufacturer in a tariffed sector, this is the first positive signal in two months, but pricing, hiring and inventory decisions that assume relief by a certain date are still a bet. Modelling margins at the current 50% tariff, at the lower August-style rates and at zero, and deciding in advance which orders to accept under each, turns a headline into a plan. Business owners should also check whether the operating line and cash on hand cover another quarter at current tariff levels. Investors may want to know how much of a Canadian equity portfolio sits in the sectors a deal would help most.

What would change our mind. We would be more confident if Lutnick and LeBlanc announce a formal negotiating round with dates. We would be less confident if either side adds a new sectoral tariff in the meantime.

What to watch. Any announcement of a formal negotiating round with dates. Any new sectoral tariff from either side. The Bank of Canada’s decision on Wednesday, where trade uncertainty shapes the growth outlook.