The U.S. economy has a GDP roughly 12x the size of Canada. Yet both economies rank in the top 10 worldwide and are heavily developed North American markets. Typically, many worldwide looks to the U.S. as the economic barometer for where things are headed. The U.S. Dollar remains the world’s reserve currency, and the U.S. has the world’s largest economy.
Because of Canada’s proximity and similarity to the U.S., parallels are even more apparent. First, the U.S. is Canada’s largest trading partner and accounts for roughly 75% of annual Canadian exports. Canada is also the US’s largest foreign energy supplier, including oil, gas, uranium, and electric power. Both countries also share similar market-oriented economic systems, patterns of production, and affluent living standards.
As we’re seeing now, the similarities persist even more in times of hot inflation and monetary tightening cycles. The latest U.S. CPI report shows inflation accelerated by 8.6% in May 2022, the highest level since December 1981. There was a 0.50% hike in May is setting the stage for more moves throughout the year, with 0.75% moves not ruled out for June and July. St. Louis Fed President James Bullard also thinks that the U.S. has to get its targeted rate to 3.5% by the end of the year.