Canadian Dollar Weakens After Fed Hike
The Canadian dollar weakened to near 1.40 per USD in mid-September, its lowest level in more than a month after the US Federal Reserve raised interest rates as expected. The Fed raised the target range for the federal funds rate by 25 bps to 3.75%-4%, reinforcing the US dollar’s advantage over the loonie. Updated Fed projections showed that most policymakers expect another hike before the end of 2026, widening the interest-rate differential between the US and Canada. The Bank of Canada kept its key policy rate unchanged at 2.25% at its September meeting, as widely expected. However, it noted that inflation risks had increased, while new tariffs had made the growth outlook more uncertain. The BoC left the future path of monetary policy open, saying it would adjust policy as needed. Governor Macklem said policymakers were prepared to raise rates if inflation remained elevated.
40 per USD in mid-September, its lowest level in more than a month after the US Federal Reserve raised interest rates as expected. 75%-4%, reinforcing the US dollar’s advantage over the loonie. Updated Fed projections showed that most policymakers expect another hike before the end of 2026, widening the interest-rate differential between the US and Canada. 25% at its September meeting, as widely expected.
However, it noted that inflation risks had increased, while new tariffs had made the growth outlook more uncertain. The BoC left the future path of monetary policy open, saying it would adjust policy as needed. Governor Macklem said policymakers were prepared to raise rates if inflation remained elevated.