Introduction to the Week Ahead
For the week of December 8th, 2025, significant economic events are on the horizon, particularly with dual central bank interest rate decisions from the U.S. Federal Reserve and the Bank of Canada. The Bank of Canada is expected to hold its interest rates steady, while the U.S. Federal Reserve is likely to implement a third consecutive 25 basis point cut.
Central Bank Decisions
Our initial forecast did not anticipate a December cut from the Fed, given that inflation in the U.S. remains above the central bank’s 2% target. However, recent communication from the Fed has leaned towards a cut, and with softer data emerging during the blackout period, it’s likely that the more hawkish members of the Federal Open Market Committee (FOMC) will not strongly oppose the cut. In contrast, the Bank of Canada’s decision to hold rates is expected to be relatively uncontroversial, following their October rate cut and subsequent signaling that the current policy rate is appropriate for delivering low, steady inflation while supporting growth through uncertainty.
Labour Market and Its Impact on the BoC Decision
The labour market has shown signs of stabilizing, with employment rising and the unemployment rate dropping. This stabilization, alongside earlier rate cuts reducing debt service pressures and financial market gains bolstering net worth, has kept household spending resilient. The Bank of Canada’s forecast for soft but positive economic growth, contingent on which their holding bias was based, seems to be on track. However, underlying inflation pressures are running above the BoC’s 2% target, which could prove stickier than anticipated due to stronger consumer and government spending in 2026.
Week Ahead Data Watch
Several key data releases are scheduled for the week ahead:
- The Q3 national balance sheet account details are expected to show rising household net worth, driven by asset expansion outpacing liability growth. Despite a drop in home prices, robust stock market gains in Q3 are anticipated to offset this, with the households’ debt service ratio remaining relatively unchanged.
- The release of September Canadian and U.S. international trade data, delayed due to the U.S. government shutdown, is expected to show a narrowing in the Canadian trade deficit. The magnitude of this improvement will be closely watched, especially after Statistics Canada had to use imputed placeholders for Canadian export data in the Q3 GDP report.
Conclusion
In conclusion, the week ahead is marked by significant economic decisions and data releases that will provide insight into the health of the economy. The expected interest rate decisions by the Federal Reserve and the Bank of Canada, along with key data on labour markets, trade, and household finances, will be crucial in understanding the trajectory of economic growth and inflation in the coming months. As the global economy navigates through periods of uncertainty, these indicators will be pivotal in shaping monetary policy and informing investment decisions.
