RBC Economics notes that U.S. growth and labour-market momentum remain strong, with GDP forecasts revised higher to an average of 2.4% in 2026–2027 and unemployment expected near historical lows at 4.2%. Rising core inflation and producer-price data suggest building pressures, reinforcing expectations for further Fed tightening and a larger U.S. hiking cycle relative to Canada.

Stronger U.S. data underpins rate path

“U.S. core-inflation pressures are building, while the labour market remains historically tight.”

“Risks are balanced around our BoC forecast but tilted toward a larger U.S. hiking cycle, given stronger-than-expected U.S. growth, labour-market conditions and inflation pressures.”

“U.S. growth and labour-market momentum continue. GDP forecasts have been revised higher again, averaging 2.4% in 2026 and 2027, up from previous forecasts of 2.1% and 2.2%, respectively. We continue to expect the unemployment rate to average near historical lows, at 4.2% in both 2026 and 2027.”

“U.S. tariffs are having significant targeted impacts, but not enough to derail broader economic growth. The share of Canadian exports targeted by U.S. tariffs has increased following new measures imposed in August, but more than 80% of exports remain duty-free.”