USA & Canada Intelligence Brief — March 17, 2026

1 FOMC opens today — most consequential meeting of the year; first dot plot with oil shock; 99.2% hold at 3.50–3.75%; core PCE at 3.1%; Goldman pushes first cut to September; half the Committee may project zero cuts for 2026; Powell’s press conference Wednesday 2:30pm ET

The Federal Reserve begins its two-day meeting today with markets pricing a 99.2% probability of holding rates at 3.50–3.75%. The rate decision is not the story. The updated Summary of Economic Projections and dot plot are.

This is the first quarterly projection to incorporate $100+ oil, the Iran war, and a February jobs report that showed a loss of 92,000 positions. Core PCE accelerated to 3.1% year-on-year in January with a 0.4% month-on-month increase. Q4 2025 GDP was revised sharply lower to 0.7% annualised from 4.4% in Q3.

Goldman Sachs pushed its first-cut forecast from June to September. Barclays expects a single quarter-point reduction for the entire year. High Frequency Economics’ Carl Weinberg suggested the Fed should consider a rate hike. The Employ America FOMC preview anticipated the median dot may sit on a “knife-edge” with half the Committee projecting no cuts for 2026.

Powell’s term expires May 15 and Kevin Warsh’s confirmation is pending. This may be Powell’s final meeting with new projections. Today’s USA and Canada intelligence brief leads with the FOMC because the dot plot will shape global rate expectations, currency markets, and the fiscal outlook for both countries simultaneously. Equity futures pointed slightly higher Tuesday morning as oil moderated, with the 10-year at 4.206% and the 30-year at 4.855%.

2 Canada CPI plunges to 1.8% — softest since July 2025; trimmed mean at 4-year low of 2.3%; data predates oil shock entirely; BoC rate at 2.25%; April cut virtually certain; BMO warns March data will reverse trend as war hits gas prices

Statistics Canada reported that headline CPI fell to 1.8% year-on-year in February, down from 2.3% in January and below the 1.9% market consensus. The decline was largely driven by base-year effects from the end of the GST/HST tax holiday in February 2025.

The Bank of Canada’s preferred trimmed-mean core measure fell to a four-year low of 2.3%. Gasoline prices declined 14.2% year-on-year, though they rose 3.6% month-on-month in the lead-up to the Iran conflict. Natural gas fell 17.1%. Food inflation from restaurants slowed to 7.8% from 12.3% as base effects unwound.

BMO senior economist Robert Kavcic warned that March data will reverse the trend: “The longer these higher oil prices persist, the more it squeezes margins, the more that price pressure tends to get passed on.” March will be the final month affected by GST/HST base-year distortions.

The BoC rate stands at 2.25%. The disinflation combined with February’s devastating 83,900-job loss makes an April rate cut virtually certain — but the oil shock creates a medium-term inflation reversal that complicates the easing path. Canada’s economy contracted at an annualised rate of 0.6% in Q4 2025 versus the 0.2% contraction economists expected. As covered in our previous USA & Canada Intelligence Brief, the BoC faces the same impossible trade-off as the Fed: inflation pointing down before a shock that will push it back up.

3 Wall Street stages strongest rally in three weeks as oil retreats from $100 — several tankers transit Hormuz over weekend; Bessent confirms passage; WTI plunged 5.28% Monday; S&P 500 rebounds; Israel kills Iran’s top security official Tuesday as Iran strikes UAE gas field

US equity markets staged their strongest rally in three weeks on Monday after Treasury Secretary Bessent confirmed that Iranian tankers are transiting the Strait of Hormuz. Several oil tankers safely navigated the strait over the weekend, raising hopes that the waterway could gradually reopen.

WTI crude plunged 5.28% on Monday to close at $93.47. Brent eased to around $100.21. However, prices reversed Tuesday morning after Israel said it killed Iran’s top security official and Iran struck a natural gas field in the UAE, pushing WTI back up 2.7%.

The S&P 500 remains approximately 5% below its January 27 all-time high after three consecutive weekly declines. The VIX sits at the 91st percentile over five years. Futures pointed to a modestly positive open Tuesday as investors awaited the FOMC.

India is attempting to get six additional vessels through the strait through bilateral diplomacy with Tehran. The gap between Monday’s relief rally and Tuesday’s renewed escalation captures the market’s fundamental problem: every reason for optimism about Hormuz is immediately tested by the next military development. Goldman expects Brent to average above $100 in March and $85 in April, with a Q4 base case of $71.

4 Trump delays Beijing summit — tells Financial Times he may postpone March 31 visit if China doesn’t help unblock Hormuz; Board of Trade mechanism from Paris talks at risk; technical discussions continue at OECD; Section 301 probes target 16 economies

President Trump told the Financial Times he could delay his expected state visit to Beijing from March 31 to April 2 if China does not help unblock the Strait of Hormuz. “I’d love to go, but I have to be here because of the war,” Trump said.

The conditional delay puts at risk the deliverables from Bessent’s six-hour “remarkably stable” talks with Chinese Vice Premier He Lifeng in Paris. The proposed Board of Trade and Board of Investment mechanisms — the most ambitious bilateral trade architecture since the Phase One deal — require a summit to formalise.

China receives 45% of its oil through the Strait of Hormuz, creating urgency on Beijing’s side. China’s MFA called for all parties to “immediately stop military operations.” Wendy Cutler of the Asia Society noted deliverables could be “spread out” across up to four leaders’ meetings this year including APEC and G20.

The Section 301 investigations opened into 16 economies add a parallel trade pressure track. Public comments are due April 15 with remedies by July. Bessent said tariffs would return to “pre-ruling levels by August” after the Supreme Court struck down the administration’s IEEPA tariffs. The combination of a delayed summit and accelerated trade probes signals that the administration is comfortable with economic pressure on multiple fronts simultaneously.

5 US fiscal position strains as war costs mount — deficit $1.004 trillion through February; 30-year auction tailed 12bp at 4.871%; Bessent authorises Russian crude waiver; gas at $3.58/gallon; CBO: $1.9 trillion FY2026 deficit; debt on track for 118% GDP by 2035

The US budget deficit reached $1.004 trillion through the first five months of FY2026, though down 12% year-on-year. CBO projects the full-year deficit at $1.9 trillion, representing 5.8% of GDP. Federal debt is on track for 118% of GDP by 2035.

The 30-year Treasury auction tailed at 4.871% versus 4.750% expected — a 12 basis point miss that signals weakening demand for long-duration US debt precisely when supply is about to increase. The 30-year yield at 4.91% reached its 95th percentile over five years.

Bessent authorised a 30-day sanctions waiver to allow purchase of Russian oil stranded at sea in tankers — a pragmatic supply move that puts the Treasury Secretary in the position of unwinding his own administration’s sanctions to manage fallout from its own war.

US gasoline pump prices rose to $3.58 per gallon, up 21% in one month, with some analysts warning of $5 per gallon by summer if the conflict persists. The SPR drawdown — the US released 172 million barrels as its contribution to the IEA’s record 412 million barrel coordinated release — will take 120 days to flow. Credit spreads widened moderately with high yield OAS at 298bp (+17bp) and investment grade at 88bp (+9bp). As covered in last week’s brief, the combined fiscal strain from SPR drawdown, war spending, and the tariff revenue gap creates a trajectory that the 30-year auction tail has already begun to price.

MONETARY The FOMC meeting is less about the rate decision — 99.2% hold — and more about the narrative the dot plot tells. Core PCE at 3.1%, Q4 GDP at 0.7%, and oil above $100 create a stagflationary cocktail that the Fed’s models were not built to handle. Goldman pushing the first cut to September and Barclays projecting a single cut for the year tell you the market has abandoned the pivot trade. The median dot may show half the Committee projecting no cuts at all. Powell’s final months as Chair will be defined by whether he can thread the needle between an energy-driven inflation surge and a cooling labour market that lost 92,000 jobs in February. The RBA’s split 5-4 hike to 4.10% today shows what happens when a central bank decides inflation matters more than growth. The question is whether the Fed reaches the same conclusion tomorrow.

CANADA Canada’s CPI at 1.8% is the kind of number that in normal times would make a rate cut a formality. The trimmed mean at a four-year low of 2.3%, a Q4 GDP contraction of 0.6%, and February’s 83,900 job losses all point in the same direction: ease. But the oil shock is coming. BMO’s Kavcic is right that “the good news is that before all this started, we were actually moving into a very good spot on inflation.” The bad news is that March data will show the war’s impact. The BoC is one of the few major central banks where a cut is still on the table, but the window is narrowing. CUSMA review beginning this week adds trade uncertainty to an already overloaded decision matrix.

MARKETS Monday’s rally was the strongest in three weeks, driven by the first genuinely hopeful Hormuz development since the war began: tankers actually transiting the strait. But Tuesday’s reversal — Israel killing Iran’s top security official, Iran striking a UAE gas field — shows why every relief rally in this crisis has been premature. The market is trading headline risk, not fundamentals, and the headlines change by the hour. WTI’s 5.28% plunge Monday and 2.7% reversal Tuesday capture the whiplash. For positioning, Goldman’s framework is the most useful: $100+ in March, $85 in April if rerouting takes hold, $71 by Q4 if flows normalise. The 30-year mortgage spiking from 6% to 6.5% connects the oil shock to housing — the transmission mechanism that reaches every American household.

FISCAL The fiscal picture is deteriorating on every metric that matters. Deficit at $1 trillion through February. CBO projecting $1.9 trillion for the full year. The 30-year auction tailing by 12 basis points. Debt on track for 118% of GDP by 2035. And now Bessent is authorising Russian crude purchases through sanctions waivers because the war his administration started is creating a supply crisis his Treasury must help solve. Gas at $3.58 per gallon and rising is the number that connects fiscal policy to kitchen tables — and to midterm elections. The SPR drawdown of 172 million barrels, the US contribution to the IEA’s 412 million barrel release, will take 120 days to flow — it is an emergency measure operating on a non-emergency timeline.

TRADE Trump’s conditional delay of the Beijing summit links two crises that the administration has been treating as separate: the Hormuz war and the China trade relationship. By making the summit conditional on Chinese help unblocking the strait, Trump is converting energy leverage into trade pressure — but China’s 45% Hormuz oil dependence cuts both ways. Beijing needs the strait open as urgently as anyone. The Board of Trade mechanism from the Paris talks was the most promising piece of bilateral trade architecture in years. If the summit slips, it slips with it. The Section 301 probes targeting 16 economies are the parallel track: statutory trade authority replacing the IEEPA powers the Supreme Court struck down. Public comments by April 15, remedies by July, “pre-ruling levels by August.” The tariff wall is being rebuilt on new legal foundations.

1 FOMC Summary of Economic Projections — Wednesday March 18 at 2:00pm ET — the SEP will show revised GDP growth (down from December’s ~2.3%), higher PCE inflation and core PCE projections, and a dot plot that may eliminate rate cuts assumed in December; the gap between the dot plot and market pricing will define the next phase of the rates trade; Powell’s press conference at 2:30pm will be scrutinised for how he characterises oil-shock inflation — “transitory” language would tank markets, while “looking through” it would signal patience.

2 February PCE data — Friday March 21 — consensus 2.9% year-on-year headline, core 3.1%; January core came in at 3.1% with 0.4% month-on-month; this will be the first hard inflation data the market receives after the FOMC; if core PCE reaccelerates, the single-cut-for-2026 narrative hardens; if it eases, the September cut timeline survives.

3 Hormuz tanker transits — testing whether the strait is reopening — several tankers sailed through over the weekend; India is pushing six more vessels through bilateral diplomacy with Tehran; the success or failure of these transits determines whether the strait reopens through diplomacy or requires the military coalition Trump is demanding; Tuesday’s escalation (Israel killing Iran’s security chief, Iran striking UAE) complicates the trajectory.

4 Trump-Xi summit — March 31 now conditional on Hormuz — Trump told the Financial Times he may delay; the Board of Trade and Board of Investment mechanisms from the Paris talks require a summit to formalise; up to four Xi-Trump meetings possible in 2026 (bilateral, APEC, G20); the delay risks losing the diplomatic momentum from Bessent’s “remarkably stable” Paris engagement.

5 CUSMA zombie review — formally underway since March 16 — the trilateral agreement enters its scheduled review with Canada-US relations at their lowest point in modern polling (9% ally trust); Stellantis relocating $13 billion (~C$18.2 billion) in production to the US; Mexico’s energy reforms complicate trilateral dynamics; the review could produce modest adjustments or become a vehicle for broader trade confrontation.

6 Powell term expiration May 15 — Warsh transition looming — Kevin Warsh’s pending confirmation as Fed Chair creates a two-month window of leadership uncertainty at the most consequential monetary policy moment since the pandemic; the March SEP will be Powell’s final major economic forecast; market participants are watching whether Warsh will inherit a data-dependent framework or impose a more politically responsive posture.

Jerome Powell — the Fed Chair enters his final consequential meeting with a stagflationary bind: core PCE at 3.1%, GDP at 0.7%, oil above $100, and a February jobs report that lost 92,000 positions; the dot plot he presides over will define the rate outlook for the remainder of his tenure; the transition to Warsh adds uncertainty about whether his successor will continue the data-dependent approach or pivot to a more politically responsive posture.

Scott Bessent — the Treasury Secretary ran two diplomatic tracks simultaneously: six hours of “remarkably stable” trade talks with He Lifeng in Paris while authorising a 30-day sanctions waiver for Russian crude at sea; his confirmation that Iranian tankers are transiting Hormuz drove Monday’s relief rally; his push for Chinese Boeing and energy purchases positions the Beijing summit for deliverables — if it happens.

Donald Trump — the President’s conditional delay of the Beijing summit links the Hormuz crisis to China trade for the first time; his Hormuz coalition demand produced the most significant allied refusal since Iraq — every major partner said no or stalled; the threat of a “very bad future” for NATO and gas at $3.58 per gallon connect the war directly to midterm vulnerability.

Mark Carney — Canada’s PM manages the CPI plunge, the CUSMA review, and the C$35 billion (~$25 billion) Arctic defence plan simultaneously; the 9% ally trust figure gives him domestic cover for a more independent posture; Canada’s energy self-sufficiency means the oil shock is a terms-of-trade positive for Alberta even as it squeezes consumers and complicates the BoC’s rate path.

Robert Kavcic — BMO’s senior economist delivered the sharpest assessment of Canada’s CPI paradox: “The good news is that before all this started, we were actually moving into a very good spot on inflation”; his warning that oil-driven transportation cost increases will reverse the disinflation trend from March onwards frames the BoC’s dilemma — cut into a data set that is about to deteriorate.

1 FOMC rate decision and SEP — March 18 at 2:00pm ET — the hold is certain but the dot plot is not; the median may show zero or one cut for 2026 versus the two projected in December; GDP forecasts will be revised lower; inflation forecasts higher; Powell’s press conference at 2:30pm will set the narrative for the next quarter of markets.

2 Section 301 trade probes — public comments April 15; remedies by July — USTR targeting the EU and 15 other economies; the Supreme Court’s IEEPA ruling forced a legal pivot from emergency powers to statutory trade authority; Bessent said tariffs would return to “pre-ruling levels by August”; the probes add a second front of economic pressure alongside the energy crisis.

3 CUSMA review underway since March 16 — the trilateral agreement enters its scheduled review with Canada-US relations at their lowest point in modern history; Mexico’s position is complicated by energy sector reforms; the review could produce modest adjustments or become a vehicle for broader trade confrontation depending on whether the administration treats it as routine or strategic.

4 Powell term expiration May 15 — Warsh transition looming — Kevin Warsh’s pending confirmation creates a two-month window of leadership uncertainty; Trump has been openly critical of Powell, demanding rate cuts on Truth Social; the March SEP will be Powell’s final major economic forecast; whether Warsh inherits a data-dependent framework or imposes a more politically responsive approach will define the Fed’s credibility through the midterms.

The FOMC meeting opening today is the most consequential since the emergency cuts of 2020. The dot plot must project a rate path through an economy that is simultaneously losing jobs, facing $100+ oil, and watching core inflation stick at 3.1%.

Cutting risks reigniting inflation. Holding risks deepening a labour market that has contracted. There is no good answer, and 99.2% of the market expects Powell to say so by doing nothing. What he says about the oil shock matters more than what he does with rates.

Canada’s CPI at 1.8% is the last good inflation number the BoC will see for a while. The trimmed mean at a four-year low, the Q4 contraction, and February’s job losses all argue for a cut. But March data will show the war’s impact on gasoline, transportation, and food costs.

The BoC is one of the few major central banks where easing is still on the table. That window is narrowing with every day of $100+ oil. CUSMA review beginning this week adds trade uncertainty to monetary uncertainty.

Monday’s relief rally on Hormuz tanker transits was the market’s way of saying it will take any reason for optimism. Tuesday’s reversal — Israel killing Iran’s security chief, Iran striking a UAE gas field — was reality’s way of taking it back.

Goldman’s framework is the best guide for Latin American investors: $100+ March, $85 April, $71 Q4 — but only if flows normalise. The 30-year mortgage spiking to 6.5% connects the oil shock to the housing market, which connects it to every American household and to the midterm elections.

Trump’s conditional delay of the Beijing summit is the most significant development in US-China relations this week. By linking Hormuz to trade, he converts energy leverage into commercial pressure. But China needs the strait open as urgently as anyone.

The Board of Trade mechanism from Paris was the most promising bilateral architecture since Phase One. If the summit slips, the architecture slips with it — and Section 301 becomes the default framework.

The fiscal numbers describe a trajectory that the 30-year auction tail has already begun to price. A trillion-dollar deficit through February, $1.9 trillion projected for the year, and debt heading for 118% of GDP by 2035 — all calculated before the war spending is scored. This is part of The Rio Times’ daily intelligence coverage of the USA and Canada for the Latin American financial community.

Bessent authorising Russian crude purchases through sanctions waivers to manage a supply crisis from his own administration’s war captures the policy contradiction of the moment. The SPR drawdown that once looked like a strategic reserve is now an emergency supply measure, and the 120-day delivery timeline means it arrives after the damage is done.