Canada’s economy showed clear signs of deceleration in the third quarter, reducing market-implied odds on further rate increases from the Bank of Canada. Although inflation measures remain sticky and above the central bank’s target range, excess demand is clearly ebbing, and labour market tightness is beginning to ease. Conditions will likely worsen in the months ahead as the early autumn surge in global borrowing costs inflicts pain on one of the world’s most deeply over-leveraged private sectors hard, and we expect rate differentials to tilt more firmly against Canada into early 2024, offsetting commodity price gains and a generalized dollar decline in dragging the loonie lower.