What Moved
September was the month the rate conversation changed direction. The Bank of Canada held at 2.25% on September 2, its seventh consecutive hold, but its language shifted: "Upside risks to the Bank's inflation forecast have increased," it said, citing "limited progress in reopening the Strait of Hormuz" and noting that financial conditions had tightened. Two weeks later, on September 16, the Federal Reserve raised its target range by 25 basis points to 3.75–4.00%, a unanimous 12–0 decision and its first hike in more than three years. The Bank's Summary of Deliberations, published the same day, went further than its statement: energy spillover "could require a monetary policy response to prevent broad-based inflation from setting in." On September 17, markets were pricing the October 28 decision as close to a coin flip, narrowly favouring a hike; RBC and Desjardins said they expected the Bank to hold.
Governor Macklem, speaking in Halifax on September 21, said, according to press accounts, that if the new US tariffs persist, fourth-quarter growth could be roughly halved to below 1%, and that with crude near US$100, inflation would edge up and the risk of persistence had risen. Those accounts reported no explicit guidance on rates.
Bond markets moved ahead of the Bank. The Government of Canada two-year yield, at 3.11% on September 2, reached 3.40% on September 23. The ten-year reached 3.99% on September 29.
Brent futures settled at $101.21 on September 9, the highest close since May 22. On September 11, drones shut Saudi Arabia's East-West pipeline, the main route for moving crude around the Strait of Hormuz, and US diesel reached a record $6.06. Brent settled at $104.82 on September 17 and traded near $108 by September 28, after President Trump rejected an Iranian proposal at the UN General Assembly to reopen the strait.
The labour market turned. August employment, released September 4, fell by 42,000, with unemployment unchanged at 6.4%. Reported wage growth slowed to 2.0% year-over-year. The public sector shed 20,000 jobs. July GDP, released September 29, was flat at 0.0%; the August flash estimate was +0.2%, a reading that, as KPMG noted, will only partly capture the August 22 tariff start.
August CPI, released mid-month, held at 3.0% year-over-year, in line with expectations. Gasoline was up 22.8%, ex-gasoline inflation rose to 2.4%, and CPI-trim and CPI-median were steady at 1.9% and 2.0%.
The trade dispute escalated on both sides. Canada's counter-tariffs on C$27.6 billion of US goods took effect September 8. The same day, the White House issued five further Section 338 proclamations: import bans on packaged alcohol, an annex of dairy products and large motorcycles from September 29; scope changes from September 15 that allow Section 338 duties to stack on Section 232 tariffs for combined rates of up to 75%; and the removal of Canadian products from US federal procurement schedules. The import bans took effect as scheduled, covering about US$967 million of Canadian goods per CBC, roughly 87% of it alcohol. We found no new Canadian retaliation announced by month-end.
Confidence fell with it. The CFIB's long-term business barometer dropped to 47.9 from 57.6 in August, and its short-term index to 43.3; 62% of small firms cited fuel costs. The Nanos consumer confidence index fell below 50, to 49.86.
Housing stalled. CREA's August data, released September 15, showed sales down 0.7% month-over-month and 6.9% year-over-year. The MLS Home Price Index was flat on the month and down 3.0% year-over-year; the average price was $668,219, up 0.6%. CREA's commentary noted: "What has changed is the broader economic environment." TRREB's August HPI was down 4.5% year-over-year, Greater Vancouver's benchmark was down 5.6%, and national asking rents fell 4.8% to $2,035 (Rentals.ca).
The TSX fell 2.85% in September to close at 35,235.87, a one-month low — down from its August 25 record. Large-scale capital commitments continued regardless: LNG Canada announced a final investment decision on Phase 2 on September 29, at roughly C$32 billion, and Shell closed its approximately US$16.5 billion acquisition of ARC Resources on September 2.
In private markets, Avenue Living Core Trust extended a redemption delay that had been in place since March, according to the manager. In the US, Blackstone's BCRED received an estimated US$4.3 billion of third-quarter redemption requests, about 10% of shares, and kept its 5% quarterly cap for a third straight quarter.
What It Means
The quarter ended with the policy backdrop that most private real estate and private credit underwriting did not assume. Through the first half, the reasonable base case was a central bank on hold with an easing bias. By the end of September, the US central bank had hiked, the Bank of Canada was describing its inflation risks as tilted upward, and the two-year yield had risen more than half a percentage point from mid-July to its September 23 peak. No Canadian hike has happened. But the cost of fixed-rate debt moves with the bond market, not with the overnight rate, and the bond market has already moved.
The inflation picture explains why the Bank is uneasy rather than alarmed. Headline CPI has held at 3.0% for two straight months on gasoline, while trim and median remain at or below 2%. The concern the Bank named is not today's core reading but the risk that a sustained energy shock seeps into broader prices. That is a forecast risk, and it is the kind that central banks act on pre-emptively when expectations start to drift.
The tariff wall and the jobs data are now in the same frame. July's +75,000 looked like strength a month ago; August's −42,000 suggests it was the high-water mark before the break. The sectors exposed to Section 338 are specific, but the confidence readings — a CFIB long-term index of 47.9 and Nanos below 50 — are broad.
On liquidity, the redemption pattern of the year continues. A pause described at the outset as temporary was extended, and BCRED held its 5% cap for a third quarter. In August, Trez Capital announced a temporary suspension of redemptions at five of its open-ended funds, four mortgage trusts and a real estate fund trust, after suspensions at all five in August 2025 and at four of them in February 2026 (Trez Capital, August 17). What the pattern illustrates is that periodic-liquidity terms are a ceiling on what can be withdrawn, not a promise of what will be.
What We're Watching
The Bank of Canada's October 28 decision and Monetary Policy Report — the first full forecast update since the trade talks collapsed and oil moved above $100.
September employment in early October, after August's decline and wage growth at 2.0%.
September CPI in October, and whether ex-gasoline inflation's move to 2.4% in August persists.
Brent futures and the status of the Strait of Hormuz, now with the main bypass pipeline offline.
CREA's September data and annual forecast in mid-October, as higher fixed mortgage rates feed through to the resale market.
The CSA's listed issuer financing exemption comment period, which closes October 21.
Closing
The third quarter opened with a recovery that appeared to be gathering pace and closed with three shocks arriving at once: oil above $100, a rate cycle turning upward, and a tariff regime with no CUSMA shelter. The data that described the summer was good; the data that will describe the fall has only begun to arrive, and its first readings point lower. For Canadian private market investors, the discipline is to stress-test underwriting against rates that rise as well as fall, to read core inflation and headline inflation as separate signals, and to treat a fund's liquidity terms as a maximum rather than an expectation.