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The assumption almost every plan was quietly built on
For roughly two years, one belief sat underneath most household financial decisions on both sides of the border: rates had peaked, and the next move was down. Nobody had to say it out loud. It showed up in the choice to ride a variable mortgage a little longer, in the decision to park cash and wait for a better conversion level, in the assumption that a business line of credit would get cheaper to carry, and in retirement projections that penciled in a friendlier borrowing environment three years out.
That assumption has now been withdrawn in both countries. Not dramatically, and not in a single announcement, which is exactly why it is easy to miss. The Bank of Canada has stopped moving. The Federal Reserve has started talking about the other direction. Neither is forecasting relief.
This is worth separating from the noise of any given month. Rate decisions get covered as events, with odds and reactions and a scramble to interpret a press conference. The durable change is not any one meeting. It is that the direction of travel has been revoked, and plans built on the old direction have not been revisited.
What the Bank of Canada has actually signalled
The policy rate is 2.25%, and it has now been held there for seven consecutive decisions. Seven holds is no longer a pause between moves. It is a stance.
More telling than the level is what Governor Macklem is now worried about. The framing has shifted from supporting a soft economy to containing inflation, and he has named higher energy costs, ahead of Canada’s incoming dollar-for-dollar tariffs on US goods, as the larger potential driver of price pressure for households and businesses. He has also acknowledged that growth picked up after a stalled year, while flagging that uncertainty about how durable that rebound is has increased alongside new US trade actions.
A central bank that is watching inflation rather than growth is not a central bank preparing to cut. The next scheduled decision is October 28, and the useful thing to carry into it is not a prediction but a recognition that the bar for cutting has moved higher than it was a year ago.
Why the American side has moved further
In the United States the conversation has travelled past holding. Markets have moved to roughly even odds on an increase, an outcome that was not being priced at all a month earlier. The repricing followed a shift in tone from the Federal Reserve toward unfinished business on inflation, reinforced by energy costs that have not cooperated.
There is a second, less discussed change. The Fed has signalled it intends to give markets less explicit forward guidance about the path of rates than it has for more than a decade. Whatever the merits of that, the practical consequence for anyone planning around US rates is more uncertainty between meetings, not less. Expectations will now be set by incoming data rather than by advance signalling, and data surprises are noisier than speeches.
For a cross-border household the two central banks matter together rather than separately. It is the gap between them, not either level on its own, that prices what a Canadian dollar buys. When one bank is anchored and the other is live in both directions, that gap becomes less stable, and it becomes less sensible to plan as though a particular exchange rate will be waiting for you.
The decisions this actually changes
Four things are worth revisiting, and none of them require a view on the next meeting.
First, fixed versus variable exposure. A variable rate is a bet that rates fall or hold. That bet has become less favourable on both sides of the border, and it deserves a deliberate decision rather than inertia. The relevant question is not which is cheaper today but how much rate movement a household budget can absorb without changing behaviour.
Second, the currency idle cash sits in. Cash waiting for a better conversion level is a position, and it earns different yields in different currencies with different tax treatment. Cash that has been waiting for two years for a level that never arrived is worth a fresh look.
Third, the sequence of a two-currency drawdown. Which account you draw from first, and in which currency, changes the outcome materially when the rate differential is unstable. That sequence should be written down rather than decided each time money is needed.
Fourth, conversion. The strongest argument for converting on a schedule tied to real obligations, tuition, a property cost, a payroll run, a drawdown, is precisely that the drivers keep rotating. Some months the currency responds to oil. Some months to a central bank. Some months to policy risk. A schedule does not require you to know which one is in charge.
The useful posture is not prediction. It is a written plan for a small number of scenarios, so that a meeting outcome becomes an input rather than an emergency.
Frequently asked questions
Is the Bank of Canada going to cut interest rates again in 2026?
Nothing is decided, and the Bank does not pre-commit. What can be said is that the policy rate has been held at 2.25% for seven consecutive decisions and that Governor Macklem’s stated concern has shifted toward inflation risk rather than weak growth. The next scheduled announcement is October 28, 2026.
What is the Bank of Canada’s policy rate right now?
2.25%, unchanged since the series of holds began. The Bank most recently confirmed the hold on September 2, 2026, alongside a warning that inflation risk is rising, with higher energy costs cited ahead of incoming tariffs as the larger driver.
Why would the US Federal Reserve raise rates rather than cut them?
Because underlying inflation has not improved as expected and energy costs have been pushed higher by supply disruption. Market-implied odds of a September increase moved to roughly even after the Fed signalled it still has work to do on inflation, having previously been priced near zero.
What does a wider gap between Canadian and US rates do to the Canadian dollar?
Interest rate differentials are one of the primary drivers of currency movement. All else equal, when US rates rise relative to Canadian rates, capital is drawn toward US-dollar assets and the Canadian dollar tends to weaken. The relationship is not mechanical and other factors, notably oil, can override it in any given period.
Should I lock in a fixed rate now?
That depends on the specific loan, the term available, the penalty structure, and how much payment variability the household can absorb without changing its behaviour. The general point is that riding a variable rate has been an implicit bet on falling rates, and that bet has become less favourable in both countries, so the choice deserves an active decision rather than default.
I hold accounts in both countries. Which currency should I keep cash in?
There is no single answer, because it depends on where the money will actually be spent and when. The practical starting point is to match cash to known obligations by currency and timing, rather than holding a large balance in one currency while waiting for a conversion level that may not arrive.
Sources: Raymond James, “the Open” (subscription client newsletter, no public URL) | Bank of Canada, policy rate announcement September 2, 2026 https://www.bankofcanada.ca/2026/09/fad-press-release-2026-09-02/ | Bank of Canada, opening statement https://www.bankofcanada.ca/2026/09/opening-statement-2026-09-02/ | CBC https://www.cbc.ca/news/business/boc-decision-sept-2026-9.7328101 | BNN Bloomberg https://www.bnnbloomberg.ca/business/2026/09/02/bank-of-canada-holds-key-rate-at-225-once-again/ | CNBC https://www.cnbc.com/2026/08/31/markets-see-warsh-endorsing-a-rate-hike-in-september-not-everyone-is-convinced.html
This article is for general informational purposes only and reflects market conditions as of September 7, 2026. It is not investment, tax, or legal advice, and it does not account for your personal circumstances. Sartorial Wealth Inc. does not prepare tax returns. Please consult qualified professionals regarding your own situation.
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