Two data sets landed within minutes of each other Friday morning and described two different economies. Statistics Canada reported Q2 GDP growing at a 3.4 percent annualized pace, faster than the Bank of Canada's own projection, alongside a July employment gain of 75,100 jobs against a forecast of 15,000. The US Bureau of Labor Statistics reported nonfarm payrolls falling by 23,000, well short of a consensus near 85,000, with a combined 103,000 shaved off May and June in downward revisions.
The Bank of Canada's overnight rate has held at 2.25 percent through six consecutive decisions. The Federal Reserve's benchmark sits at 3.50 to 3.75 percent after a 9 to 3 vote on July 29, the most divided FOMC decision since 2016. The gap between the two policy rates, near 137 basis points, is not new. What changed Friday is the direction each side's incoming data is now pulling.
The Three Who Wanted to Hike
Regional Fed presidents Beth Hammack, Neel Kashkari and Lorie Logan dissented at the July meeting, arguing for a 25 basis point increase rather than a hold. Their case rested on a labour market that had shown consistent strength through 2026 after a weaker 2025, alongside inflation still running above the Fed's 2 percent target under Chair Kevin Warsh, who has been explicit about driving prices back to target even if it means tolerating some labour market softness.
Friday's jobs report did not support that case. A negative payrolls print, a fourth consecutive month of declining labour force participation, and wage growth slowing to 3.2 percent annually, the softest since May 2021, gave the three dissenters' argument considerably less to stand on than it had two weeks earlier.
How Fast the Odds Moved
Market implied probabilities the Fed holds steady at its September 16 meeting shifted quickly across the week. The chart traces that move from roughly one in three a week before the jobs report, through a coin flip on Thursday, to close to three in five by Friday afternoon following the release.
Probabilities reflect the market implied chance the Fed holds its benchmark rate steady at the September 16 meeting, as reported across four separate CME FedWatch readings between July 31 and August 7, 2026.
These figures are cumulative market pricing, not a poll of FOMC members, and they can move again before September 16 on the July CPI release August 12 and the July PPI release August 13. Both land before the FOMC minutes from the July meeting publish August 19, which will show how the committee weighed the three way dissent in real time.
The Canadian Side of the Same Morning
Canada's data points the opposite direction. A 3.4 percent annualized Q2 growth print running ahead of the Bank of Canada's own forecast, paired with the strongest jobs beat in recent memory, gives the BoC's own hawks more to work with than they had going into the summer, even as governor Tiff Macklem has been careful not to signal urgency. The five-year bond yield's jump to 3.274 percent on Friday, covered in today's Tax and Wealth desk, is the market's own read on that shift.
Advisors fielding questions about interest rate direction this week should expect two separate conversations: one where clients ask why Canadian rates might rise on strong domestic data, and one where clients ask why the Fed, widely expected to hike as recently as two weeks ago, now looks unlikely to move at all in September.