TSX Edges Up as Market Eyes Dual Central Bank Decisions on Rate Policy

The Canadian stock market closed marginally higher on Tuesday, with the S&P/TSX Composite Index advancing 74.40 points to settle at 31,244.37, representing a 0.24% gain. The modest rally unfolded as traders positioned themselves ahead of critical rate announcements expected from both the Bank of Canada and the Federal Reserve, with the former set to deliver its decision in the coming session.

Interest Rate Decision Timeline and Market Expectations

The Bank of Canada’s interest rate announcement dates remain central to market sentiment. The central bank is scheduled to reveal its monetary policy stance, with market participants keenly awaiting insights from Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers during the subsequent press conference. Their commentary on economic conditions and the bank’s projected rate trajectory through 2026 will likely shape investor positioning.

According to a Reuters poll of 33 economists, consensus points to the overnight rate holding steady at 2.25%, the level established following the BoC’s last decision on October 29, when policymakers cut rates by 25 basis points. Over the preceding 17 months, the central bank has implemented nine consecutive rate reductions. Market consensus suggests no further changes are anticipated throughout 2026, reflecting a shift in the central bank’s outlook. South of the border, rate cuts are expected from the Federal Reserve, creating a divergence in monetary policy trajectories.

Economic Backdrop and Inflation Pressures

Recent economic releases have demonstrated resilience in Canada’s labor market, which has exceeded expectations, while inflation data has remained steady. These developments have tempered investor appetite for additional rate cuts this year. The combination of stronger-than-anticipated employment figures and stable price pressures has altered the calculus for policymakers deliberating on Canada interest rate announcement decisions.

However, the broader economic environment remains challenging. The Canadian economy continues to face headwinds from the 35% tariff regime imposed by the United States on Canadian exports. This trade friction has compounded growth concerns and added complexity to the central bank’s policy considerations.

Trade Tensions Escalate Further

Recent developments on the tariff front have intensified pressures on the Canadian economy. The U.S. administration announced $12 billion in support for American farmers while signaling potential new levies on agricultural imports, specifically targeting rice inflows from India and fertilizer shipments from Canada. These threats come amid stalled trade negotiations between Washington and Canadian officials, with talks having effectively ceased. Prime Minister Mark Carney’s diplomatic efforts to secure a favorable bilateral trade arrangement have yielded limited results so far.

The upcoming renewal of the Canada-United States-Mexico Agreement next year adds another layer of uncertainty. Market participants are increasingly concerned about the possibility of either a full withdrawal from or substantive amendments to the tripartite agreement. Despite these challenges, Canadian businesses have managed tariff impacts by strategically utilizing the trade agreement framework to redirect shipments where possible.

Sector Performance and Stock Movements

Four of eleven sectors posted gains during the session. The materials sector led the advance, gaining 1.97%, followed by healthcare (+1.23%), financials (+0.42%), and information technology (+0.26%). Within the materials space, silver miners dominated, with Pan American Silver Corp surging 11.07%, Aya Gold and Silver Inc climbing 7.47%, and First Majestic Silver Corp advancing 7.18%. Curaleaf Holdings Inc and Sprott Inc also registered significant gains at 6.21% and 2.97% respectively.

Conversely, energy stocks faced the steepest declines, dropping 1.14%, followed by industrials (-0.93%), consumer discretionary (-0.76%), and communication services (-0.44%). Notable losers included Paramount Resources Ltd (down 4.29%), Bombardier Inc (down 4.17%), Advantage Oil & Gas Ltd (down 4.04%), Kelt Exploration Ltd (down 3.47%), and Gildan Activewear Inc (down 1.32%).

Corporate Earnings and Capital Returns

Groupe Dynamite delivered earnings that surpassed market expectations, reporting net income of C$81.505 million, or C$0.71 per share. The company’s revenue expanded 40.3% year-over-year, reaching C$362.970 million compared to C$258.772 million in the prior year. In recognition of the strong performance, the board authorized a one-time special cash dividend of C$2.30 per share, payable December 29 to shareholders of record as of December 19.

The market will continue to digest these developments while awaiting the Bank of Canada’s rate announcement and the accompanying policy guidance that will frame investor expectations heading into year-end.