The Seven, October 30, 2026

In this week’s The Seven…

• Credit crunch - Bank of Canada increases its policy rate
• What the Fed said - Waiting for more data
• Trade secrets - A federal push to boost Red Seal completions
• Next week - U.S. midterms
• Also next week - A new federal budget and jobs report
• Interesting Fact: CFB Suffield - It’s huge!
• Chart of the Week: Paused - Economic growth in Canada

“Who you gon' call? Trade negotiators!”

—"Ghostbusters," with apologies to Ray Parker Jr.

Driving from Calgary to Medicine Hat this week, I was struck by two things: 1) the incredible beauty of Alberta, and 2) the rapidly shifting basis of global economic affairs. The former was uplifting, the latter not so much.

The global economy is not what it used to be or, at least, not what we thought it was going to become. The “we” here is a loose collection of political actors and thought leaders mostly based in the Western world (e.g., Canada, the U.S., France, and Germany). The name of the game was “globalization”—a borderless global economy in which (conveniently) western liberal democratic values and capitalism would be the norm. It was the “end of history” because there would be no “big ideas” left to fight over. Communism lost. The West won.

Then China raised its hand with some objections and started to flex its newfound political and economic muscles. This was followed by the pandemic and questions about whether it was prudent to rely so heavily on faraway places that may not share your priorities, and the Russian invasion of Ukraine, which was exactly what wasn’t supposed to happen in an economically interdependent world. And now the de facto leader of the West, the United States, has been redefining its role in the world while throwing one tariff-spanner into the global works after another.

The process of change is not over. We are living in the middle of it in real time. But one thing among the uncertainty seems clear: it wasn’t all smooth sailing before, but the global economy has become more complex, more divided, and more prone to disruption. Trade will continue, but maneuvering through regional blocs and tariffs and an even more dangerous world has become the new normal and will require a trading nation like Canada to be hyper-vigilant on a wide range of fronts. This includes, but is not limited to, repairing our relationship with the U.S., figuring out our relationship with China, nurturing trade agreements with multiple regions, and getting our domestic economic house in order as much as possible.

In a nutshell, it’s not just Halloween that is making it scary out there right now.

Credit crunch - Bank of Canada raised its policy interest rate

As we covered on Wednesday, the Bank of Canada came off the sidelines this week and elected to make borrowing a little more expensive in the hope that it will cool future inflation. Like other preventive actions, it will be difficult to assess the impact of the treatment on the future path of inflation, especially since higher interest rates can’t reopen the Strait of Hormuz and bring down energy costs.

The Bank may also have been a little too optimistic about the ability of the Canadian economy to absorb the hike given today’s flat reading for GDP growth in August and the advance estimate of a decline in September (see our Chart of the Week below). If next Friday’s Labour Force Survey report is a weak one, the Bank’s ongoing challenge of walking a tightrope between rising inflation and tepid economic growth will get even tougher. The Bank’s next interest rate announcement is on December 9.

Federal Reserve leaves rates alone - for now

Unlike the Bank of Canada, the U.S. Federal Reserve decided to leave its policy interest rate alone on Wednesday, maintaining its target range of 3.75% to 4%. There was dissent in the ranks, with two members of the 12-member Federal Open Market Committee (FOMC) in favour of raising rates by a quarter percentage point.

Inflation is running hotter in the U.S. than in Canada and the U.S. economy is, according to the FOMC press release, “expanding at a strong pace.” U.S. Fed Chair Warsh admitted that they haven’t achieved price stability, but emphasized that they are working on it.

This raises the question of why the Fed didn’t raise rates this week. One reason is that the Fed did raise rates in September. Another reason comes from Warsh who said they want to take advantage of the “information-rich” period ahead to provide clarity on what to do next. There are two more inflation readings and two more labour reports before the Fed meets in December.

Trade secrets - A federal push to boost Red Seal completions

As explored in our two-part “Who’s going to build?” series, Canada is on the cusp of a labour shortage that may threaten its ability to execute on the nation-building projects essential to Canada’s next leg of growth.

The Federal government has introduced a new incentive to bolster Red Seal completions as part of the Team Canada Strong initiative. The Red Seal Completion Bonus is a one-time $5,000 payment for journeypersons who successfully complete a formal apprenticeship and earn their certification in a designated Red Seal trade on or after April 1, 2025. By financially rewarding those who finish their apprenticeships, the program aims to speed up the certification pipeline and help recruit, train, and hire up to 100,000 new Red Seal trades workers by 2031.

Next week - Clear as mud - U.S. midterms

Voters in the U.S. go to the polls on Tuesday to decide which party controls the House of Representatives and the Senate. There are lots of ways this could shake out in terms of the impact on the Canadian economy, but one thought is that, if the Democrats take control of Congress from the Republicans, it would put more pressure on the Trump administration to lower tariffs on Canada. That’s the expectation, but President Trump has been known to act in ways that defy expectations.

It has also been suggested that the Trump administration would, with the distraction of the midterms behind it, focus on a deal with Iran to end the hostilities, which would ease the pressure on energy prices. There are, however, conflicting signals from the White House pointing to both the possibility of renewed military action and a post-election agreement. In the words of the President on Fox News: “Now, my question is, do I make a deal with them, or do I finish them off?”

Also next week - A new federal budget and jobs report

The 2026 Canadian federal budget will be tabled in the House of Commons on Thursday, November 5, 2026 by Finance Minister François-Philippe Champagne. Federal budgets are extremely long and almost incomprehensible documents, but we will be looking for two key things: 1) the federal government’s economic outlook; and 2) how it intends to execute on the productivity-enhancing measures it has put forward (e.g., major projects, increased trade with countries other than the U.S., and more private sector business investment).

On Friday, the jobs report for October will be released by Statistics Canada. Month-to-month swings in the results are notoriously volatile, so we will be looking for how October’s numbers speak to the longer-term trend. In that regard, national employment growth has been weak so far this year and that’s before the full impact of the U.S. tariffs and Canadian countertariffs that went into effect in August and September. Hopefully, it will be a surprisingly strong jobs report, but we anticipate only modest employment growth in October.

Interesting Fact: Room to grow - CFB Suffield

On Thursday, I had the pleasure of listening to a presentation at the Defence Growth Forum in Medicine Hat by Lieutenant-Colonel Michael Onieu about the future of Canadian Forces Base Suffield. Located in southeastern Alberta, CFB Suffield is the largest military base in the Commonwealth. At 2,700 square kilometres, it is roughly half the size of Prince Edward Island.

The base is a multi-use facility and is home to the Manoeuvre Training Area (itself 1,588 square kilometres), Defence Research and Development Canada’s Suffield Research Centre, the British Army Training Unit Suffield, a National Wildlife Area, thousands of oil and gas wells, an elk herd, and grazing areas for cattle.

The base is perfectly situated to be a catalyst of economic diversification as Canada seeks to enhance its military capabilities and related industries such as drone technology.

Chart of the week: Paused - GDP in Canada

Hot off the digital press this morning comes the national GDP report for August alongside a preliminary reading for September. Economic activity stalled in August, with a majority of industries contracting. An improvement in retail and manufacturing activity was overshadowed by pullbacks in public administration and wholesale trade.

More importantly, real GDP growth in the third quarter is tracking around 1.3% (annualized), less than half the Q2 pace and falling below the Bank of Canada's latest estimate of 2.0%. Today’s report aligns with our September forecast for annual growth to reach roughly 0.9% for this year.

Currently stalled economic activity reinforces the case for the Bank of Canada to proceed carefully following this week's rate increase.