The Canadian dollar weakened to near 1.40 per U.S. dollar in mid-September, its lowest level in more than a month, after the Federal Reserve raised its target federal funds rate by 25 basis points to 3.75%-4%. Updated Fed projections showed most policymakers expect another increase before the end of 2026, reinforcing the U.S. dollar’s interest-rate advantage over the loonie. Canada’s 10-year government bond yield settled near 3.94% after falling as low as 3.87% on lower oil prices, then rose following the Fed’s decision. A halt in the oil rally after reports of a potential recovery of Saudi Arabia’s key East-West pipeline helped slow global yields. The Bank of Canada kept its policy rate at 2.25% at its September meeting, while warning that inflation risks had increased and new tariffs had made the growth outlook more uncertain. Governor Tiff Macklem said policymakers were prepared to raise rates if inflation remained elevated. The BoC had also identified persistently high fuel costs, Middle East tensions, potential damage to refining capacity and tariff-related business costs as risks that could keep inflation above its July forecast, although it found little evidence of broad energy-price pass-through into non-energy goods and services. Officials said growth was broadening and the labor market improving, but the economy remained in excess supply and the recovery faced greater uncertainty.