Canada

Research evidence excerpt

Michael S Hanson (1-212) 622-8603

JPMorgan Chase Bank NA

Bennett Parrish (1-212) 622-9003

JPMorgan Chase Bank NA

North America Economic Research

14 August 2026

Canada

JPMORGAN

Recent data suggest policy is modestly accommodative

US trade policy uncertainty has worsened

ket looks to have found a higher gear of job creation, and the

unemployment rate is at a 24-month low of 6.4%, slack still

remains elevated by traditional measures—and wage growth

has slowed as well (Figure 2). In our view, this points to

underlying inflation remaining at or slightly below target.

We see core CPI at 1.8%oya in July; 3.0% headline

Midway between the key July data releases—last week’s jobs

report and next week’s CPI report—is an opportune time to

assess the Bank of Canada’s current policy stance. At 2.25%,

the rate remains at the bottom end of the BoC’s estimate of its

range for neutral, which was left unchanged earlier this year

(Figure 1). We had anticipated a slight downward revision

given the damage to potential from the trade war as well as

slower immigration. That said, the recent improvement in the

labor market and soft core inflation suggests policy may now

actually be slightly to modestly accommodative.

Figure 1: BoC policy rate

%, p.a.; shaded area denotes BoC estimate of nominal neutral rate

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Tariff risks tick higher

The other primary risk affecting the outlook is US trade policy, and that uncertainty has only worsened of late. The fate of

USMCA remains in doubt, and Trump’s threatened 50% tariffs on Canada are set to take effect next week. Further, this

week the US Department of Commerce proposed adding 14

more articles to the Section 232 tariff program on steel, aluminum, and copper products, at tariffs ranging from 15% to

50%. Both these and the 338 tariffs may turn out to be merely

a negotiating ploy, and their bark may be worse than their bite

with only about $22bn of Canadian exports potentially

impacted. Nonetheless, the balance of risks arguably has

shifted more toward downside growth concerns—pending the

July CPI report.

Core CPI to remain just below 2%

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Source: Bank of Canada, J.P. Morgan

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