United States: US Dollar draws support from growth and labour market momentum – RBC Economics

GDP growth forecasts for the U.S. have been raised to an average of 2.4% in 2026–2027, RBC Economics notes, with growth and labour-market momentum remaining strong and unemployment expected to stay close to historical lows at 4.2%. With core inflation rising and producer-price figures also pointing to mounting pressures, expectations for further Fed tightening and a larger U.S. rate-hiking cycle than Canada's have been reinforced.

Robust U.S. Data Supports Further Rate Rises

"U.S. core-inflation pressures are building, while the labour market remains historically tight."

"Risks are balanced around our BoC forecast but tilted toward a larger U.S. hiking cycle, given stronger-than-expected U.S. growth, labour-market conditions and inflation pressures."

"U.S. growth and labour-market momentum continue. GDP forecasts have been revised higher again, averaging 2.4% in 2026 and 2027, up from previous forecasts of 2.1% and 2.2%, respectively. We continue to expect the unemployment rate to average near historical lows, at 4.2% in both 2026 and 2027."

"U.S. tariffs are having significant targeted impacts, but not enough to derail broader economic growth. The share of Canadian exports targeted by U.S. tariffs has increased following new measures imposed in August, but more than 80% of exports remain duty-free."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)