Inflation Jolt to Fade, Fed to Stay on Sidelines

Persistent inflation remains the primary driver of central bank policy as recent Consumer Price Index and Producer Price Index readings exceed expectations. Despite these inflationary pressures, the U.S. consumer maintains resilience supported by record-high net worth and steady employment, contributing to a robust 3.25% annualized GDP growth forecast. While business investment in AI faces a "reset" as investors demand tangible returns on massive capital expenditures, the technology continues to be viewed as a transformative force comparable to electrification. Jennifer Lee, Senior Economist at BMO Capital Markets, anticipates one final Federal Reserve rate hike in December, followed by a prolonged pause through 2027. In Canada, elevated energy prices—with Brent crude at $108 a barrel—present a dual impact, benefiting resource-rich provinces like Alberta while simultaneously squeezing household discretionary spending and complicating the Bank of Canada's inflation outlook.