USA & Canada Intelligence Brief — Thursday, May 28, 2026

Headline PCE inflation hit 3.8%, the highest since 2023, but a soft 0.2% monthly core reading offered some easing hope. Q1 GDP was revised down to 1.6% from 2%. The Bank of Canada released its Financial Stability Report and signalled it is weighing rate hikes on oil-driven inflation. The loonie strengthened to 1.35. Today’s USA and Canada intelligence brief covers the finance, markets, and economy tape — compiled across English and French-Canadian sources.

United States — Inflation Data

Headline PCE Hits 3.8%, Highest Since 2023

The Fed’s preferred inflation gauge, the PCE price index, rose to 3.8% year-on-year in April, its highest since May 2023, driven by the oil-price shock. The monthly headline rose 0.4%, a deceleration from March’s 0.7%.

Consumer spending rose 0.5% as Americans grappled with higher gas and essentials costs. Personal income slipped 0.1% on the month.

Soft Core Offers Some Easing Hope

Core PCE rose just 0.2% on the month, below the 0.3% consensus and a deceleration from March, lifting the annual rate to 3.3%. The soft monthly reading suggests the prior month’s price burst may be starting to ease.

Underlying inflation continues to climb largely on tariff effects, Bank of America noted. The annual core rate is the highest since October 2023.

United States — Growth

Q1 GDP Revised Down to 1.6%

First-quarter GDP was revised to an annualized 1.6%, down from the initial 2% estimate, on weaker consumer spending and business investment. Consensus had expected the 2% reading to hold.

The pace is still a sharp acceleration from the prior quarter’s 0.5%. The revision reframes how much momentum the economy carried into the second quarter.

The Stagflation Signal

The combination of 3.8% inflation and downgraded growth sharpens the stagflation tension facing the Fed. Sticky prices against softer activity is the central policy dilemma.

The data is likely to keep the Fed on the sidelines until the current inflation wave subsides. Markets read it as reinforcing a patient stance.

United States — The Fed

Musalem Pushes Back on the Productivity Thesis

St. Louis Fed President Musalem, speaking in Reykjavik, expressed skepticism about new Chair Warsh’s view that rising productivity will prove disinflationary. He called it “risky to rely on the prospect of higher productivity growth in the future to solve our inflation problem today.”

He said a vigilant focus on returning inflation to target best serves both mandates. The remarks counter a key argument from Warsh and White House officials.

Rates Held Across Three Meetings

The Fed has held the funds target at 3.50-3.75% across its first three 2026 meetings, with the March median projection showing one cut. Officials increasingly emphasise inflation uncertainty before easing further.

Market expectations have shifted from one-to-two cuts toward a steadier path. Energy-supply uncertainty has complicated the inflation outlook.

Canada — Monetary Policy

Bank of Canada Releases Financial Stability Report

The Bank of Canada published its Financial Stability Report and Financial System Survey today. The releases assess vulnerabilities across housing, household debt, and the financial system.

The bank held its overnight rate at 2.25% for a fourth straight meeting in late April, with prime unchanged at 4.45%. Q4 2025 GDP contracted 0.6% as unemployment held between 6.5% and 7%.

Governing Council Now Weighs Hikes

The BoC’s deliberations summary revealed the Governing Council is examining options that include rate hikes to address oil-driven inflation from the Mideast conflict. It is a notable shift from the prior easing bias.

Macklem said consecutive hikes could be needed if cost pressures from higher global oil prices spread. The scale would depend partly on energy-sector investment and the loonie.

Canada — Currency

Loonie Strengthens to 1.35 per US Dollar

The Canadian dollar rallied to around 1.35 per US dollar, its strongest since June 2025, supported by higher oil prices and a more constructive fiscal stance. It had weakened to 1.396 at the end of March before reversing.

National Bank projects USD/CAD toward 1.31 by year-end in its base case. Higher oil and a potentially stronger trade balance underpin the move.

The USMCA-Renewal Swing

Analysts widely expect the loonie to firm in 2026, though the USMCA renewal is the key downside risk. CIBC sees USD/CAD near 1.37 into mid-year before easing to 1.34.

A widening Canada-US monetary-policy gap also supports the currency. Oil-producing provinces like Alberta and Saskatchewan are the fiscal beneficiaries.

Markets

US Equities at Record Highs on Ceasefire Hopes

The S&P 500 and Nasdaq touched fresh all-time highs after a report that negotiators agreed a 60-day memorandum to extend the Iran ceasefire. The S&P rose 0.5% and the Nasdaq 0.6%, though traders stayed wary pending final approval.

The PCE and GDP data tempered the rally by reinforcing the sticky-inflation picture. Rising long-end yields remain the offsetting pressure on valuations.

Corporate Movers

Snowflake surged about 37.5% after announcing a $6 billion AWS commitment alongside strong earnings. Micron jumped 3.5% on a UBS upgrade, while Nvidia and Qualcomm lagged.

Dell, Autodesk, Dollar Tree, MongoDB, and Gap headline the day’s earnings. The AI-spending narrative remains the dominant equity driver.

What to Watch

• Jun 16-17 · FOMC June — first Warsh-chaired meeting after hot PCE
• Ongoing · Core PCE 3.3% / headline 3.8% — Fed sidelined
• Ongoing · BoC hike-option pivot on oil inflation
• Ongoing · Loonie at 1.35 — National Bank sees 1.31 year-end
• Ongoing · USMCA renewal — the key CAD downside risk
• Ongoing · Q1 GDP 1.6% — momentum into Q2 in question
• Ongoing · Snowflake $6bn AWS — AI-capex narrative