TSX Closer: The Index Slumps As Market Watchers Left Dazed and Confused After Central Bank Updates

04:22 PM EDT, 03/18/2026 (MT Newswires) -- The Toronto Stock Exchange slumped Wednesday on mixed commodity prices, but also as updates from the Bank of Canada and then the U.S. Federal Reserve appear to have left investors across North America more dazed and confused than they were going in to today given the uncertainty around how long the Middle East war will continue.

The resources-heavy S&P/TSX Composite Index fell 616.42 points, or 1.85%, to 32,312.67, for its first loss of the week, with only the Energy sector higher and Base Metals the biggest loser. In contrast, the S&P 500 lost 1.35% and the Nasdaq lost near 1.5%.

Energy rose near 0.8% as oil traded higher even as a report showed U.S. inventories unexpectedly rose last week despite the largest supply shock on record as Iran continues to block the Strait of Hormuz. West Texas Intermediate crude oil for April delivery up $0.09 to US$96.30 per barrel, while May Brent oil was up $3.80 to US$107.22.

But Base Metals lost near 4% with gold trading at a six-week low midafternoon on Wednesday as a report showed U.S. wholesale-price inflation surged last month, firming expectations the Federal Reserve's policy committee would -- as it did -- leave interest rates unchanged when it ended its two-day meeting today. It also maintained a median forecast for one rate cut in 2026. Gold for April delivery was down $115.00 per ounce to US$4,893.20, the lowest since Feb.5.

Reflecting some of the central bank reaction, veteran economist David Rosenberg published a note entitled 'Has the Fed Lost Its Marbles?' in which he said the Fed may well have reason to lift its inflation forecast, but he added "its stepped-up growth projection is beyond bizarre".

Rosenberg cites "a very perplexing set of results" from today's FOMC meeting, mostly from the change in the economic forecasts to +2.4% this year from +2.3%; and to +2.3% from +2.0% for 2027, "despite the fiscal withdrawal we will see next year". "It's one thing to lift the inflation view based on the impact of the Iran war, but how could it be that the GDP projections were lifted?," he asked.

Meanwhile, the Bank of Canada, as widely expected, held its key benchmark interest rate steady at 2.25%, but it was seen to have a future hiking bias.

Derek Holt, Head of Capital Markets Economics at Scotiabank, published a note entitled 'Bank of Canada Hawkishly Warns on Energy Risks, Markets Tentatively Pricing Our Q4 Rate Hikes'. In it, Holt noted OIS markets were pricing an October 25bps hike with almost half of another hike in December. Scotiabank's forecast remains two hikes this year in Q4. "One key is that when given the opportunity to shoot down a future hiking bias, Macklem declined," he said.

In a note summary, Holt said "slack and soft momentum in core inflation give the BoC time to assess" where it goes from here with interest rates, but he added striking out reference to "the current policy rate remains appropriate" may signal "less patience than thought" as "the message was clear that a prolonged energy shock would risk tightening."

According to Holt, "waiting for clarity on inflation risk could let the cat out of the bag once more" and end up showing the BoC "may be misinterpreting financial conditions" and "may be partly understating the income benefits of higher energy prices." Holt also said the BoC needs to clarify its "risky stance" on courting lower house prices.

Elsewhere, RBC in a note also said the BoC delivered the expected hold at today's meeting, with concerns on both sides of their inflation mandate. RBC noted higher energy prices due to the Iran conflict are the primary upside risk, while the BoC's economic assessment was "clearly dovish". Ultimately, RBC said, the duration of the conflict and impact on the flow of oil and other commodities through the Strait of Hormuz will be a key factor, but it added the weak starting point for the economy affords the BoC some time to assess whether and to what degree higher energy prices are having knock-on price effects elsewhere in the economy. RBC's view remains that GDP growth should improve over the course of 2026 and the second half still has some hike risks. "However, a quick, sustained de-escalation of the conflict would likely see a sharp snap lower in Canadian yields/rates given the weak current state of the economy and recent trend lower in core inflation."

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