Monday Market Minute | Sep 21, 2026

The Fed hikes for the first time in more than three years — and an October Bank of Canada move becomes a coin flip

What Moved

The US Federal Reserve raised its target range by 25 basis points to 3.75–4.00% on September 16, a unanimous 12–0 decision and its first hike in more than three years. Earlier in the week, the US 10-year Treasury yield reportedly topped 5% intraday.

In Canada, August CPI came in at 3.0%, in line with expectations; inflation excluding gasoline rose to 2.4%, while the trim and median core measures held at 1.9% and 2.0%. On September 16 the Bank of Canada published its summary of the September 2 deliberations, which said energy spillover "could require a monetary policy response to prevent broad-based inflation from setting in." It put new US tariffs at about 5% of goods exports, with a direct effect "likely modest." By September 17, markets were pricing the October 28 decision as a coin flip, narrowly favouring a hike; RBC and Desjardins expect holds through 2026, and Capital Economics called it "a close call." Brent futures settled at $104.82 that day.

Housing stalled. CREA's August sales fell 0.7% month-over-month and 6.9% year-over-year, and the MLS Home Price Index was flat on the month and 3.0% below a year earlier, with months of inventory at 4.8. CREA's Cathcart: "What has changed is the broader economic environment." CMHC's first estimate of August housing starts was 229,046 units, annualized. On September 15, the Section 338 list changes took effect, narrowing the Section 232 exception to the dairy heading.

Why It Matters

Much of the private real estate and private credit market was underwritten for an easing or on-hold rate path. The Fed has now moved, Canadian two-year yields have risen sharply since July, and the Bank's own deliberations describe a scenario in which it responds to energy-driven inflation. No Bank of Canada hike has occurred, and market pricing is not Bank guidance — but the range of outcomes now plainly includes tightening.

The inflation detail is what makes the decision hard. Core measures remain near 2%, which argues the impulse is narrow. Inflation excluding gasoline edged up to 2.4%, which is the kind of broadening the Bank has said it is watching for. In housing, CREA's average price rose 0.6%, but that reflects the mix of homes sold; the benchmark measure, down 3.0%, is the better read on value.

Signal to Watch

Governor Macklem speaks in Halifax today; watch whether he frames the tariff shock or energy inflation as the larger risk. BILD and Altus report August GTA new home sales on September 22, and CFIB's September Business Barometer on September 24 will show how small firms are reading the trade break. The US import bans take effect September 29.