Unusually Strong Nominal Growth Backdrop
In the United States, the Federal Reserve raised the target range for the federal funds rate to 3.75%–4.00% in September, noting that economic activity is expanding at a solid pace, domestic spending remains resilient, capital investment is robust and inflation remains elevated. That mix is supportive for earnings, but it has also pushed expected policy rates and longer-term bond yields higher. Canada is facing a similar tension. The Bank of Canada held its policy rate at 2.25% in September, but highlighted higher energy prices, tariffs and a stronger economic rebound as reasons inflation risk has shifted higher. Canadian GDP rebounded in the second quarter, while CPI has hovered around 3%, leaving the Bank focused on whether energy and tariff costs leak into broader prices.
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