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Markets Digest Hot U.S. Inflation as Iran Tensions Keep Oil Elevated

Publication:  moneysavings.ca / Canadian Money Brief  Date:  Tuesday, May 13, 2026 The TSX opens cautiously Wednesday after hotter-than-expected U.S. CPI data rattled Wall Street on Tuesday, while Strait of Hormuz disruptions continue to lift energy stocks and pressure the loonie toward 1.35 against the greenback. TSX ~34,291 S&P 500 7,400.96 ▼0.16% WTI Oil ~$102/bbl ▲ Gold ~$4,721 USD/oz ▼ USD/CAD ~1.35 US CPI Apr 3.8% ▲ (est. 3.7%) Market Overview Canadian investors are starting Wednesday on a cautious note following a mixed session south of the border. U.S. equities dipped Tuesday after April's consumer price index came in at 3.8% — a touch above the 3.7% consensus forecast and the highest reading since May 2023 — while the core rate held at 2.8%, also above expectations. The data has effectively closed the door on any Federal Reserve rate cuts in 2026, with traders now pricing in a roughly 70% chance of a rate hike by April 2027. For Canadians, the ripple effects...
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Bank of Canada Poised for Another Rate Cut Amid Trump's Tariff Threats

 

The Bank of Canada is expected to announce its sixth consecutive rate cut this week, as economic pressures mount from both domestic and international fronts. Economists predict a modest quarter-point reduction, bringing the key policy rate down to 3%, following recent inflation and jobs data.

Canada's annual inflation rate fell to 1.8% in December, largely due to a temporary GST tax break introduced by the federal government. This has provided the central bank with some leeway to lower rates further. However, the looming threat of a 25% tariff on Canadian goods by U.S. President Donald Trump has added a layer of uncertainty.

Trump's tariff threats, which could take effect as soon as February 1, have raised concerns about a potential recession in Canada. The Bank of Canada is keenly aware of these risks and may feel a sense of urgency to act preemptively. Despite the recent deceleration in inflation, the possibility of a trade war with the U.S. could prompt the central bank to continue its rate-cutting spree.

The Bank of Canada's decision will be closely watched, as it navigates the delicate balance between stimulating economic growth and managing inflationary pressures. With the Canadian economy facing significant uncertainty, the central bank's actions in the coming weeks will be critical in shaping the country's economic trajectory.

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