Canada’s main stock index reached a new all-time high on Thursday, driven by optimism that the U.S. Federal Reserve is still on track to cut interest rates next week, despite slightly hotter-than-expected inflation data.
The S&P/TSX Composite Index rose 0.6% to 29,352.92, surpassing its previous record close.
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While U.S. consumer prices rose more than anticipated in August, a sharp increase in first-time unemployment claims signaled continued weakness in the labor market—keeping rate cut expectations intact. Markets are now fully pricing in a 25-basis-point cut at the Fed’s September 16–17 meeting, with bets on additional quarter-point cuts at each of the remaining meetings this year.
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“The Fed will prioritize the softening jobs data over inflation and move ahead with rate cuts,” said Allan Small, senior investment advisor at the Allan Small Financial Group with iA Private Wealth.
He added that the Bank of Canada is likely to follow the Fed’s lead, potentially with more aggressive easing, given that inflation is currently less of a concern in Canada.
Expectations of further BoC rate cuts have also lifted market sentiment, particularly after last week’s weaker-than-expected Canadian employment data.
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