Canadian Market Pares Early Gains on Rate Cut Uncertainty, Inflation Data

Canada's main stock index trimmed early gains Tuesday as investors digested higher-than-expected inflation data, tempering optimism for near-term interest rate cuts. The S&P/TSX Composite Index closed up just 23.48 points at 23,510.15 after rising more than 150 points earlier in the session. The consumer price index rose 2.6% year-over-year in December, above the Bank of Canada’s 2.5% threshold, reducing pressure on policymakers to lower borrowing costs soon. Financial and energy stocks led gains, supported by rising bond yields and oil prices. West Texas Intermediate crude settled above $74 per barrel. Major bank shares rose between 0.8% and 1.5%, while insurers and telecoms lagged. Market participants now expect the Bank of Canada to hold rates steady through Q2 2026, with a possible cut delayed to late summer. "Inflation is sticky, and the central bank will need clearer signals before pivoting," said Priya Desai, economist at BMO Capital Markets.