Good morning. The Bank of Canada and U.S. Federal Reserve headline the week with their final lending-rate calls of the year. Those decisions are in focus today, along with the other files we’re watching.

Travel: Air Transat says it will begin suspending flights on Monday with a complete shutdown by Tuesday after a 72-hour strike notice from the union representing the company’s 750 pilots.

Trade: A majority of British Columbians would support building a new oil pipeline from Alberta to the West Coast, even if the B.C. government opposes it, a new Nanos Research poll shows.

Tech: Canadian tech leaders are warning that government funding efforts aren’t keeping up with the torrid pace of AI development.

1. Grand Central

For both the Bank of Canada and the U.S. Federal Reserve, Wednesday marks the final interest-rate decisions of a year defined by patchy data, sticky inflation and mounting pressure in labour markets.

In Canada, Governor Tiff Macklem is expected to hold the policy rate at 2.25 per cent, reinforcing his recent message that monetary policy can only do so much in a trade war. Lower borrowing costs can boost spending and investment, Macklem said in October, but they can’t insulate manufacturers from tariffs or boost productivity.

Further cuts are widely seen as unlikely unless conditions deteriorate – potentially through 2026.

In the U.S., Federal Reserve Chair Jerome Powell is facing trade-driven uncertainty, but from a different angle.

Prices there remain firm, while unemployment has risen. Market watchers are betting Powell will trim borrowing costs by a quarter-point in an effort to bolster a worrisome labour market. Lower rates give businesses and households breathing room – making it cheaper to invest, expand and retain workers. But by loosening too quickly or deeply, the Fed risks prolonging high inflation.

2. Not budging over the Liberal budget

While Macklem punts the U.S. trade war to policymakers, policymakers are struggling to navigate the week.

A souring minority Parliament is set to break for the holidays on Friday, but the Liberal government’s budget bill is still stuck in its opening debate. If it doesn’t pass before MPs scatter, the budget’s plan to cut billions by shrinking the public service hits a delay.

Roughly 68,000 federal employees have already received letters telling them they may qualify for an early departure incentive. But there’s a catch: the program only exists if the budget bill becomes law.

Those letters say eligible employees will have 120 days to apply – either from Jan. 15, 2026 or 120 days after the legislation takes effect, whichever comes later.

And with the House rising Dec. 12 and not returning until Jan. 26, that earliest window is already off the table.

3. (Some) Canadians are getting wealthier

Economists expect new national balance sheet and trade data, due on Thursday, to show that Canadians got a bit richer this fall. Strong stock-market gains in the third quarter helped lift household net worth, even as home equity dipped with lower home prices, RBC economists wrote in a note to clients on Friday. And the share of income going to debt payments is expected to remain little changed at about 14.4 per cent, with payments rising at roughly the same pace as disposable income.

Delayed September trade figures should also show Canada’s deficit narrowing. But economists will be watching the size of that improvement closely, since some earlier export numbers were based on estimates while U.S. data was unavailable.

4. At the bell

• An eye on AI: Oracle Corp. shares are down more than the company might have prophesied since it reported quarterly results on Sept. 9, as investors in the cloud infrastructure company grew concerned about its debt. The tech giant has major clients in Google, Anthropic, Meta and OpenAI, so its results on Wednesday could be treated as a proxy for Silicon Valley.
• Dollars and sense: Shares in Dollarama Inc., meanwhile, have benefited from an increase in consumers seeking relief on everyday goods. Analysts expect the budget-friendly retailer to raise its full-year sales forecast in Canada after moving merrily along through the holidays.
• Stretched: Lululemon earnings on Thursday could also show gains from recent discounting efforts, as the athletic apparel brand cools down from a rocky 2025.

For more on the markets this week, check out Amber Kanwar’s Setup.

5. Running up that hill

With less than a month to go, the S&P/TSX Composite Index is sporting a return of 30.4 per cent, including dividends. That puts 2025 in the race for the best year in Canadian equities, according to data dating back to 1988. The current high-water mark, set in 2009, is 35.1 per cent.

Not bad for a country mired in a trade war/productivity crisis/housing slump, Tim Shufelt writes.