In this week’s The Seven… 

• 2026 outlook - A pivotal moment 
• Manifesting - Our holiday economics wish list for 2026!
• Canada rate hold - BoC seems content where it is
• U.S. rate cut - Next moves are far less clear
• Project update - Another data centre proposed
• Feel the vibrations - Economic resiliency or noise?
• Interesting Fact: We’ve sailed through peak uncertainty
• Chart of the Week: Alberta’s growth trajectory - The last decade and beyond

"Look…if you had one shot or one opportunity…to seize everything you ever wanted…one moment…would you capture it? Or just let it slip?"

—Eminem, “Lose Yourself”

It’s cliché to say “what a difference a year makes”. But I really mean it this time.

On these pages, one year ago (on December 13, 2024), I wrote:

“The world is always unpredictable, but with a new U.S. president threatening new tariffs, that cloud of uncertainty has gotten a whole lot thicker (think cumulonimbus).”

“With inflation at target and the Canadian economy too weak to ignore, the Bank of Canada was swayed into making another jumbo rate cut.”

The first point is still partly true. But, according to the Economic Policy Uncertainty Index (see our Interesting Fact below), uncertainty has actually declined over the last year. And going into 2026, our prediction is that we’ll be looking less at U.S. trade policy and more at ourselves - namely our ability to execute on big promises.

The second point on monetary policy is wildly different than a year ago. Gone are the jumbo cuts, as we enter into what looks to be an extended pause.

The stage is set. Next year is about getting things done in Canada without further assistance from the Bank of Canada. Will Canada capture the moment? Or let it slip?

Holiday reflections - Alberta’s economic outlook (much) better than once feared

Outside the big interest rate announcements, it was a quieter week in economics land. We may be biased, but we’re going to call the release of the ATB Economic Outlook on Tuesday the main event of the week.

A brief recap of our outlook:  2.1% growth next year and 2.4% in 2027 - once again outpacing the national economy. That growth is spurred by lower interest rates, rising energy exports to overseas markets, some population ‘catch-up’ construction, and a lighter tariff burden in Alberta vs. other provinces. Weighing in the other direction is flat oil and gas capital spending (due to lower oil prices), a cooldown in population growth, continued trade uncertainty and ongoing cost-of-living pressures.

If 2.1% growth seems just “OK” to you, recall the economic anxiety early in the year. We ran a tariff scenario in March that would have had the economy grow only 0.5% this year and 1.3% next. Cumulatively over these two years, we’re tracking 2.6 percentage points higher than that dreaded scenario.   

A big part of that surprise is the CUSMA exemptions that we had not factored in, which has lowered Alberta’s effective tariff rate to below 2%.

But beyond that (even with the lighter-than-expected tariff touch), I don’t think anyone can say they predicted the surge in job creation in late 2025. Alberta has separated from the rest of the pack with employment up 4.2% year-over-year (y/y) in November vs. 1.1% in the rest of Canada. We’re not   overreacting to this surge, and see employment growth moderating from the recent pace due to ongoing caution seen in hiring intentions surveys.

One word I’d use to describe Alberta in 2026 is rebalancing. After a few years of rapid population growth, that trend line is shifting. A much slower pace of population growth will help homebuilders to catch up, bringing balance to the housing market. It will lead to less competition for limited jobs, pushing down the unemployment rate.

What else are we looking for in 2026? In 2025, we spent much of our time updating you on Trump tariff threats, with a rolling list of what’s in and what’s out (head is still spinning). We’ll still do that, but you’ll hear more from us on what’s happening in Canada as we wait to see if the ‘wake up call’ promises to build big things faster and export more overseas translates into meaningful execution. Until final decisions are made, we’re not baking proposed projects into our forecast.

(Some inside forecasting baseball: our macro model is ‘begging’ for more investment - it’s struggling to find growth sources outside the investment channel. I cannot overstate enough how much Alberta and Canada need a rotation towards private investment.)

Holiday wishes - Our economics list for 2026

Our team has been marinating in some pretty negative economic news this year. Our goal is to cut through the noise. Sometimes understanding the big picture can make things seem less scary, especially in the world of social media where that larger context is often missing.

It’s also important to have fun. That’s what we did with the ATB Economics holiday wish list video. Check it out here, and let us know what you think. Special thanks to Kaelan Chambers from our Communications team for spearheading this (including the props!).

Let’s hang out here - Bank of Canada seems content with its new policy rate

The main takeaway from the Bank’s hold decision?  They’re happy with the policy rate right where it is.

Growth has been surprisingly resilient (though Macklem was talking down these surprises - see below).  In fact ‘resiliency’ has replaced ‘recession’ as the talking point.  And underlying inflation is sticky at around 2.5%.

The bottom line is that Macklem and team seem to be done cutting - other policy levers will need to carry the day to drive growth in Canada. In fact, my colleague Mark Johnson in ATB Capital Markets is musing of a not insignificant chance that the BoC hikes next year if the economic data continue to surprise. He puts the odds of a hold at 60%, cut at 10% and hike at 30%. I said that’s reasonable, but would take 5% off the hike and add 5% to the cut. ‘Potato, potato’.

The general point is that we expect the BofC to hold in our base case, with careful attention to the economic data to determine if a hike or cut will happen. Check out my full, impromptu discussion with Mark here.

Fed cuts this week - Next moves are far from clear

The U.S. Federal Reserve’s decision to cut its policy rate to a range of 3.50%-3.75% on Wednesday was not shocking.  But it gets interesting from here on in, with a heavy dose of politics in the mix.

Fed officials are in a bit of a pickle due to its dual mandate - the requirement to pursue both maximum employment and price stability (meaning stable, low inflation).

In 2026, the Fed is likely facing a "stagflation-lite" scenario where the economic data (namely weaker job growth and sticky inflation) points in opposite directions for the two mandates.

This conundrum has led to deep internal divisions within the Federal Open Market Committee (FOMC). Recent rate decisions have seen an unusually high number of dissents, with some members arguing for a larger cut (to help the labour market) and others arguing for no change (to better fight inflation).

The path forward hinges entirely on which side of the mandate - inflation or employment - the majority of the committee prioritizes based on incoming economic data.

This is where it gets political. The President has indicated that he will announce his nominee for the next Federal Reserve Chair in early 2026 to replace Jerome Powell’s expiring term in May.

Given Trump’s prior comments, it’s likely that the President will choose someone (like Kevin Hassett) with a dovish bent - that is someone who leans more towards cutting.

Powering AI - New data centre proposed

In our Outlook, we assembled a list of major projects in Alberta. A new one has emerged this week which we did not include:

Capital Power is proposing a 1.0 to 1.5 Gigawatt (GW) hyperscale data centre, the Polaris @ Genesee Energy Campus, near Edmonton. The goal is to power the AI infrastructure boom using its existing natural gas generation, with an initial agreement for 250 MW and an expected start date around 2028.

Feel the vibrations - Economic resiliency or noise?

Was it just me, or was Tiff Macklem talking down the resilient economic data on Wednesday?

At this time of year, providing hope to Canadians is tempting. But the Bank of Canada reminded us of the “structural” challenges and not to get ahead of ourselves. Key quote:

“While information since the last decision has affected the near-term dynamics of GDP growth, it has not changed our view that GDP will expand at a moderate pace in 2026 and inflation will remain close to target.”

In other words, there’s a lot of noise in the data - the GDP shocker in Q3 was actually due to a big drop in imports, and domestic demand is weak. Now we’re expecting a flat Q4, though we’ve upgraded our call for annual GDP to 1.7% in 2025.

I still think we can use the word resiliency AND noise in the same sentence. Even when you sort through these wild swings, the Canadian economy has performed much better than the scary tariff recession scenario laid out by the Bank of Canada in April.

Interesting Fact: It may not feel like it, but economic uncertainty has actually improved

The Economic Policy Uncertainty Index for Canada has fallen to its lowest level in 12 months, but is still well above historic norms. Whether this means we’ve become desensitized to the ongoing trade noise, or the world is actually more certain, this is good news heading into 2026.

The Economic Policy Uncertainty Index tracks media coverage and is far from perfect. But before you dismiss it, a National Bureau for Economic Research (NBER) study shows it tracks nicely as a leading indicator with economic data on employment and investment.  

Chart of the Week: Alberta’s GDP growth trajectory - Past decade and next two years

Despite all the hurdles out there, Alberta is projected to keep growing at a decent pace over the next two years according to our December outlook. That doesn’t address all issues (for example, cost of living is still a big concern for many), but it is a better path ahead than we expected earlier this year.  And after a tough decade (2015-16 recession, 2018-19 market access challenges, 2020 COVID), the economy is finding its footing and now outpacing the rest of the country in growth.

Answer to the previous trivia question: Known as Hyperion, the world’s tallest tree is located deep within Redwood National Park in California. Its exact location is kept secret to protect it from damage by visitors.

Today’s trivia question: How many Olympic medals has Catriona Le May Doan won?