Scotiabank Forecast

Scotiabank forecasts divergent economic paths for the US and Canada in 2026, with the US facing a slowdown and persistent inflation, while Canada undergoes a reacceleration of activity.

Key Takeaways

• 1.The US and Canada are on divergent monetary policy paths, with the Fed expected to ease late this year while the Bank of Canada moves toward normalization via rate hikes.
• 2.US inflation is proving persistent and less tied to energy, suggesting the Fed may not wait for inflation to hit target before cutting rates to support a weak labor market.
• 3.Geopolitical risks, specifically the ongoing Middle East conflict, remain a significant upside risk to inflation via potential oil price shocks.

Table of Contents

• Scotiabank Forecast: The Tale of Two Economies on Two Different Tracks
• US EXPANSION LOSING MOMENTUM, INFLATION BECOMING THE KEY RISK
• CANADA: RECOVERY UNDERWAY AFTER EARLY-YEAR SOFT PATCH
• MONETARY POLICY ON DIFFERENT TRACKS
• UPSIDE RISKS TO INFLATION ARE STILL IMPORTANT

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