United States: Why are growth and labour momentum supporting the US Dollar? – RBC Economics

Expectations of further Fed tightening and a larger U.S. rate-hiking cycle than Canada’s are being reinforced by mounting price pressures, according to RBC Economics. U.S. economic growth and labour-market momentum remain robust: GDP forecasts have been raised to an average of 2.4% in 2026–2027, while unemployment is projected to stay close to historical lows at 4.2%. Higher core inflation and producer-price readings point to a build-up in inflationary pressures.

Do Stronger U.S. Data Point to Further Rate Hikes?

"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.)