Insights Morning Brief
Morning Brief for Thursday 3 September 2026
1 The Bank held at 2.25%, and changed the subject from cuts to spillover
What happened
The Bank of Canada kept its policy rate at 2.25% on Wednesday, the seventh consecutive hold. Its statement said headline inflation is hovering around 3% because of gasoline, that inflation excluding gasoline was 2.2% in July, that the economy grew 3.3% annualized in the second quarter, and that unemployment edged down to 6.4%. Governing Council said it is “prepared to adjust monetary policy as needed”. Governor Macklem: “The longer oil prices and refinery margins stay high, the greater the risk that higher energy prices spill over and turn into persistent inflation.”
Why it matters
Variable-rate mortgages, lines of credit and most business operating loans stay where they are. The change is in the language. For a year the question was when cuts would resume; the Bank has now put a hike on the table by naming the condition that would cause one. It also said plainly that monetary policy cannot offset tariffs or global energy prices, which tells you it will not cut to cushion the trade war.
Our view
We think the next move is more likely up than down, but not at the October 28 meeting unless core inflationCore inflation Inflation with the most volatile prices, mainly energy and fresh food, stripped out, so the underlying trend shows. The Bank of Canada watches this more closely than the headline number. has clearly moved off 2%. Our reasoning: the Bank wrote the spillover risk into its own statement, growth is running above trend, and the labour market is no longer deteriorating. What would change our mind: 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 or below 2.2% in the August and September reports, or a ceasefire that takes oil back under US$80.
What to consider
If a renewal or a loan review falls before the end of the year, price it on today's rates and treat a cut as a bonus, not a plan.
Where this connects
A key-personKey person insurance Insurance a business owns on the life of a person whose loss would damage it, so the company has cash to recover, replace and reassure lenders. or buy-sellBuy-sell funding Insurance that funds a buy-sell agreement: when a co-owner dies or leaves, the proceeds let the remaining owners buy their share without borrowing. arrangement that relies on borrowing at renewal is exposed to this; worth checking how the funding is structured.
Sources: Bank of Canada press release and opening statement, 2 Sep.
2 Yields kept rising on a soft U.S. jobs number. That is the combination to watch.
What happened
The U.S. 10-year Treasury bond yieldBond yield The annual return an investor gets for lending to a government or company through a bond. Yields rise when bond prices fall. Fixed mortgage rates are priced from the 5-year Government of Canada yield. reached 4.81% on Wednesday, its highest since late 2023, a day after Japan's 10-year crossed 3% for the first time since 1996. On the same morning ADP reported that U.S. private employers added 38,000 jobs in August, below the 47,000 expected and the slowest pace since January. Friday brings the official jobs reports for both Canada and the United States.
Why it matters
Normally weak jobs data pulls yields down, because it brings rate cuts closer. Yields rose instead. That means investors are pricing inflation and government borrowing, not growth, and it is the pattern that hurts a balanced portfolio: bonds and shares fall together. For a Canadian household it matters because the 5-year Government of Canada yield, which sets fixed mortgage rates, follows this market rather than the Bank of Canada.
Our view
We think the 5-year settles in the low-3% range through the fall rather than falling back. We would revisit that if Friday's payrolls confirm a genuine U.S. slowdown and oil eases at the same time; both together would bring buyers back to bonds.
What to consider
A bond bought today locks in today's higher yield if held to maturity. That is the other side of a bad week for bond prices.
Sources: market reports, 2 Sep; ADP National Employment Report, 2 Sep; BNN Bloomberg, 1 Sep.
3 Toronto bounced after the decision, led by the banks
What happened
The S&P/TSX Composite rose 108.70 points, or 0.3%, to 35,934.43 on Wednesday, recovering part of Tuesday's 445-point fall. Bank shares rose between 0.5% and 1% after the hold, and gold miners gained 2.5% to 4% as the gold price recovered from Tuesday's drop. New York was mixed, with the S&P 500 and the Dow up and the Nasdaq flat by mid-afternoon.
Why it matters
Banks are the largest weight in most Canadian portfolios, and a rate hold with a growing economy is the environment they earn best in: lending margins hold while loan losses stay contained. The miners' rebound is a reminder that the TSX is a resource index; gold and oil decide more of its daily direction than the economy does.
Our view
We think the TSX's day-to-day moves this month will be set by oil and gold rather than by anything the Bank does. A diversified Canadian equity holding is, whether the owner intends it or not, a commodities position.
What to consider
If Canadian equities are most of your portfolio, know how much of it is energy, materials and the six banks. It is usually more than people think.
Sources: Trading Economics market note, 2 Sep; The Canadian Press, 1 Sep.
4 Oil eased a little, and it is still the number the Bank is watching
What happened
WTI crude slipped 0.7% to about US$89.58 on Wednesday and Brent 0.4% to about US$94.28, after Tuesday's jump on renewed U.S. strikes on Iran and attacks on shipping in the Strait of HormuzStrait of Hormuz The narrow waterway between Iran and the Arabian Peninsula through which roughly a fifth of the world's oil moves by tanker. Any threat to shipping there moves oil prices within hours.. Gasoline was up 25.7% year over year in Canada's July inflation report, and the Bank singled out oil and refinery margins as the source of the inflation risk.
Why it matters
Oil reaches you at the pump within weeks, through the Bank of Canada within months, and through the energy weight of the TSX every day. A small dip does not change the picture: prices are still roughly a third higher than in the spring, and the Bank has now said in writing that a prolonged period at these levels is what would make it act.
Our view
We think the risk stays asymmetric. A lasting disruption in the Gulf takes oil well past US$100 and forces the Bank's hand; a ceasefire only takes it back to where it was in July. We would not build a business budget on the calm scenario.
What to consider
If fuel is a meaningful line in your costs, this quarter is the time to review pricing and supplier contracts rather than absorb the difference.
Sources: market reports, 2 Sep; Bank of Canada, 2 Sep; Statistics Canada, 17 Aug.
5 Reminder: counter-tariffs on $27.6 billion of U.S. goods start Monday
What happened
Canada's counter-tariffs of 15%, 25% and 50% on a list of U.S. products, including steel, dairy, appliances, agricultural equipment, pulp and paper, electronics and textiles, take effect at 12:01 a.m. on Monday 8 September. Goods already in transit are exempt. The Bank of Canada's statement on Wednesday described the trade situation as “fluid”.
Why it matters
If your business buys equipment, inputs or inventory from the United States in these categories, the landed cost changes on Monday. An order that ships this week arrives tariff-free; the same order next week may not.
Our view
We think this round lasts longer than the spring rounds did. Both governments have matched each other at the 50% level and neither has a scheduled off-ramp, so plan on the tariffs being in place through the winter.
What to consider
Check the tariff list against your top twenty U.S. suppliers before Monday.
Where this connects
Tariff-driven cost shocks are what a corporate cash buffer is for; the IFAImmediate Financing Arrangement (IFA) IFA: a structure in which a permanent life insurance policy is used as collateral for a loan, so the capital that funds the policy keeps working in the business or portfolio. structure exists to keep capital working while a business holds liquidity.
Sources: Department of Finance Canada, 25 Aug; Bank of Canada, 2 Sep.
| 8:30 | Canada merchandise trade balance (Jul) | +3.2B |
| 8:30 | Canada labour productivity (Q2) | +0.7% |
| 8:30 | U.S. jobless claims; trade balance (Jul) | 205K; −89.4B |
| 10:00 | U.S. ISM services PMI (Aug) | 54.2 |
| Fri 8:30 | Canada jobs report (Aug): employment change / unemployment rate | +15K / 6.4% |
| Fri 8:30 | U.S. jobs report (Aug): non-farm payrolls | +55K |
| Mon | Canadian counter-tariffs on U.S. goods take effect |
Glossary today: core inflationCore inflation Inflation with the most volatile prices, mainly energy and fresh food, stripped out, so the underlying trend shows. The Bank of Canada watches this more closely than the headline number. 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. bond yieldBond yield The annual return an investor gets for lending to a government or company through a bond. Yields rise when bond prices fall. Fixed mortgage rates are priced from the 5-year Government of Canada yield. Strait of HormuzStrait of Hormuz The narrow waterway between Iran and the Arabian Peninsula through which roughly a fifth of the world's oil moves by tanker. Any threat to shipping there moves oil prices within hours.
Sources
- Bank of Canada, Bank of Canada maintains the policy rate at 2¼%, 2 Sep 2026 primary
- Bank of Canada, Monetary Policy Decision press conference opening statement, 2 Sep 2026 primary
- Statistics Canada, Consumer Price Index, July 2026, 17 Aug 2026 primary
- Department of Finance Canada, List of products from the United States subject to counter-tariffs effective September 8, 2026, 25 Aug 2026 primary
- BNN Bloomberg, Bank of Canada holds key rate at 2.25% as tariffs, Iran war cloud outlook, 2 Sep 2026
- BNN Bloomberg, Global bond rout deepens as Japan yield hits key milestone, 1 Sep 2026
- TheStreet, Stock market today, September 2, 2026, 2 Sep 2026
- Trading Economics, Canada stock market, daily note, 2 Sep 2026
- Economic calendar, Week of 31 August 2026
Important disclosure information
All information in this material is as of 2 September 2026 unless otherwise indicated. Market figures shown in the live rails are supplied by the sources named beneath them and may be delayed.
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