Governing Council Sets March 18, 2026 as Announcement Date
The Governing Council has officially set March 18, 2026, as the announcement date for key economic developments. During recent deliberations, the Council discussed the current global economic situation and its implications. Global growth remains steady at approximately 3%, consistent with expectations outlined in January’s Monetary Policy Report.
Impact of the Iran Conflict
The outbreak of war in Iran has escalated uncertainty surrounding the global economic outlook. Energy prices have surged, contributing to rising inflation worldwide. Council members emphasized that the effects of this conflict on growth and inflation will largely depend on its duration and geographical expansion across the Middle East.
Recent Developments in Global Trade
A critical ruling from the US Supreme Court deemed tariffs imposed under the International Emergency Economic Powers Act as illegal. As a result, the US administration is looking to replace these tariffs through alternative measures. Council members confirmed that this ruling does not have direct effects on sectoral tariffs for Canadian exports, as trade risks for Canada have remained stable since January.
Economic Indicators in the United States
- Economic activity has moderated since January but remains solid.
- The US experienced a temporary government shutdown affecting consumption and spending.
- Projected economic growth for early 2026 is around 2%, driven by consumption and AI investments.
- Inflation in the US has increased in recent months, influenced by previous tariffs.
Inflation is anticipated to rise further in the second quarter, driven by ongoing energy price pressures from the Middle East conflict. However, investment outside the AI sector remains weak, and the labor market has shown slight softening.
Outlook for the Euro Area and China
The economic data from the euro area has been mixed, maintaining the overall outlook from January. Domestic demand and stable labor markets continue to bolster growth prospects. Nonetheless, the inflation outlook remains sensitive to rising energy prices due to reliance on liquefied natural gas imports.
In China, growth is mainly propelled by strong export activity, though domestic demand remains weak. Since the start of the Iran conflict, global financial conditions have tightened. Financial indicators illustrate higher global bond yields, declining stock markets, and wider credit spreads.
Risks from Middle East Conflict
- Oil and gas supply disruptions from the region could significantly impact global economies.
- Inflation effects are expected to vary, being more pronounced in energy-importing jurisdictions.
- Shipping disruptions through the Strait of Hormuz may elevate commodity costs.
Council members noted that today’s structural economic changes might limit the risks of second-round inflation effects from rising energy prices. Factors such as reduced oil consumption per output unit could diminish the impact of oil price increases on non-energy goods and services. However, public perception of inflation remains high, influenced by past spikes in gasoline prices.
Canadian Dollar Stability
The Canadian dollar has shown relative stability against the US dollar, holding just above 73 cents. It has gained strength alongside the US dollar against other currencies since the onset of the Middle East conflict.
As the Governing Council moves toward the March 18, 2026, announcement date, ongoing assessments of these global economic factors will remain critical for future policy decisions.
