The Bank of Canada held its policy rate at 2.25% on September 2, 2026, a seventh straight meeting without a move. Governor Tiff Macklem said inflation is running too high and multiple rate increases could follow if price pressures persist, and USD/CAD dropped to new session lows as traders weighed the comments.
USD/CAD is trading at new session lows after Bank of Canada Governor Tiff Macklem flagged inflation risks following the rate decision. A lower USD/CAD means the Canadian dollar is strengthening against the US dollar, and Macklem's tone gave traders reason to expect Canadian interest rates could stay higher for longer.
Inflation stays concentrated in energy
Macklem said inflation is too high and very concentrated in gasoline and oil prices, pointing to the Middle East situation and how long oil prices stay elevated as the bigger issue for the outlook. He added that risks are shifting and the Bank is prepared to adjust policy as needed.
Canada's Consumer Price Index has been running near 3% in recent months, a full percentage point above the Bank's target, while core inflation measures sat at approximately 2% as of July 2026. According to InvestingLive: "Multiple rate increases could be needed if we felt inflation is a problem."
Tariffs add another pressure point
US tariffs on Canadian goods have pushed Canada to respond with counter-tariffs valued at approximately $27.6 billion, adding a second front to the inflation picture. Retaliatory tariffs raise the cost of American imports into Canada even as reduced US demand for Canadian exports weighs on growth.
The Bank's next policy announcement is scheduled for October 28, 2026, leaving room for fresh CPI and employment data to shape the next move.
Technical levels traders are watching
Sellers have pushed USD/CAD below the 200-hour moving average at 1.3858, shifting focus to the 200-day moving average at 1.3839. Buyers have defended that level on recent sessions, so a sustained break below it would suggest sellers are taking control, while a hold could bring a bounce back toward 1.3858.
Sources: InvestingLive, Crypto Briefing
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