Key Focus This Week: 

This Week’s Focus: Fed Decision, Canadian Inflation and Economic Growth Momentum

Federal Reserve policy will be a key focus for global financial markets this week. The Fed is scheduled to announce its interest rate decision and updated economic projections on September 16. Investors will closely watch any rate adjustment, the updated dot plot and the Chair’s guidance on the policy path ahead. The policy signals could trigger repricing in U.S. Treasury yields and the U.S. dollar, with implications for equity valuations and global capital flows.

In Canada, the August CPI release on September 14 and the Bank of Canada’s meeting summary on September 16 will help markets assess the inflation trend and the outlook for interest rates. Investors will focus on how the central bank balances price pressures, economic growth and trade uncertainty. Shifts in relative U.S. and Canadian policy expectations could also influence the Canadian dollar and domestic bond markets.

On the economic data front, U.S. August retail sales, housing starts and industrial production will be released during the week, providing further insight into the strength of consumer spending, housing and manufacturing activity. With household living costs and financing pressures still in focus, the extent to which these data show resilient demand could shape expectations for economic growth and corporate earnings.

Meanwhile, energy transportation risks in the Middle East remain important to monitor. A regional meeting originally scheduled to take place in Oman on September 14 has been postponed, while developments affecting shipping through the Strait of Hormuz and related diplomatic efforts could continue to drive oil-price volatility. Changes in energy prices have implications not only for global inflation expectations, but also for the performance of Canada’s energy sector and corporate input costs.

Last Week’s Key Economic Data & News Recap

U.S. Inflation Data Reinforce Expectations for a Fed Rate Hike

U.S. PPI rose 5.4% year over year in August, while CPI increased 3.4%. Although core CPI eased to 2.4% year over year, the 0.3% monthly increase came in above market expectations, prompting investors to further price in the possibility of a Federal Reserve rate hike in September. Persistent inflation pressures and a tighter rate outlook continued to affect U.S. Treasury yields, corporate financing costs and equity valuations.

Rising Middle East Energy-Transport Risks Add to Global Inflation Pressures

Following an attack on a major Saudi oil pipeline, the route was shut down as a precaution, while shipping volumes through the Bab el-Mandeb Strait declined significantly. These developments heightened concerns over potential disruptions to crude-oil supply. Although signs of diplomatic easing on Friday helped oil prices retreat, transportation risks remain. For the United States and Canada, elevated energy prices could raise transportation and production costs, while providing support to revenues for Canadian energy producers.

U.S. Consumer Sentiment Weakens, Raising Questions About the Consumption Outlook

The preliminary University of Michigan Consumer Sentiment Index for September fell to 47.8 from 51.7, while one-year inflation expectations rose to 4.6% from 4.0%. Higher energy costs and trade uncertainty increased household concerns about purchasing power. The combination of weaker sentiment and rising inflation expectations has put greater focus on the sustainability of U.S. consumer spending and the earnings outlook for retail, services and other consumer-facing industries.

U.S.-Canada Trade Frictions Escalate, Pressuring Exports and Cross-Border Supply Chains

Following Canada’s retaliatory tariffs, the United States announced further potential countermeasures, including threats of import restrictions on Canadian dairy products and alcoholic beverages. The trade dispute has increased uncertainty around corporate procurement costs and export prospects, and could delay investment and disrupt cross-border supply chains. For Canadian markets, changes in trade policy remain an important factor shaping expectations for economic growth and corporate earnings.