Global inflation shows signs of easing

Hello everyone and welcome to market weekend review for the week of February 20th, 2026. My name is Betan Lynn. I'm a senior investment strategist and head of Canadian strategy here at Russell Investments. Today we'll be discussing three major topics. First, what investors should keep in mind about a potential Supreme Court decision on tariffs. Second, the latest non US inflation data. And finally, we'll wrap up with a look at some housing market data points. So, let's get started. Tariffs are once again the talk of the town as investors look towards three potential opinion release dates by the US Supreme Court: February 20th, February 24th, and February 25th. Now, it's important to emphasize that the Supreme Court does not publish ahead of time which specific opinions it's going to release on which specific days. Therefore, we could get a tariff ruling this month, but that could also potentially get delayed to another month in the future. When the Supreme Court does make the ruling on tariffs, it is possible we might see some near-term market volatility. However, we continue to think that it's important for investors to remember that during periods of volatility, it's important to stay disciplined and really have that long-term orientation. Broadly speaking, our view continues to be generally optimistic on the trajectory of the US economy. We think that even if the tariffs were to be kept in place instead of being struck down, the drag onto US GDP growth from those tariffs is likely to be outweighed this year by the positive tailwinds from broader AI adoption and from easier financial conditions. Meanwhile, from the inflation side of the story, we expect that the inflationary impulse from tariffs is likely to moderate by the second half of this year. And so that's one of the reasons why, as we wrote about in our global market outlook, we expect that 2026 is the year the US will likely transition from resilience towards a potential reaceleration in the economy. Next, let's talk about some of the latest non US inflation data. This week, we received inflation data from both Canada as well as the United Kingdom. So, in Canada, we saw a moderation in the year-over-year inflation rates between December of 2025 and January of 2026. And this moderation in inflation rates was seen across several different measures of inflation, whether that's headline inflation, whether that's one of the three Bank of Canada new preferred measures of core inflation, or whether that's the old traditional approach to measuring core inflation in Canada. All of those measures showed a moderation and broadly speaking, we continue to expect that inflation over time will moderate towards the Bank of Canada's 2% inflation target even if from time to time that path might be a little bit bumpy. Meanwhile, in the United Kingdom, we also got more good news on the inflation front where core inflation rates continue to moderate on a year-over-year basis in the United Kingdom. Moreover, on a month- over-month basis, we actually saw a month-over-month decline in core inflation in the United Kingdom. And we saw that decline month over month across several different categories of both goods and services. So, what does this mean in terms of central bank decisions going forward? Well, for the Bank of Canada, we think that interest rates are already at the lower end of neutral, the rate of interest that neither helps nor hinders economic activity. And so that means that it does take a higher bar for more interest rate cuts to occur in 2026 compared to in 2025. Now that being said, we continue to see signs of softness in the Canadian economy. We see that the Canadian economy is continuing to run below its longerterm potential and we still have the uncertainty of Kisma negotiations weighing over the Canadian economy. And so we still think there's a significant chance that there could be another potential rate cut by the Bank of Canada at some point this year. Meanwhile, with respect to the Bank of England, we think their interest rates are still in restrictive territory. So as inflation continues to moderate, we expect over the course of time that the Bank of England will continue cutting interest rates. Finally, in terms of the housing market, even though this week we saw an encouraging headline in the US where mortgage rates have fallen to the lowest level level in a few years, ultimately housing market activity still remains somewhat subdued. We saw the NAHB home builder confidence data was somewhat weak. Pending home sales data in the US was weak. And we also saw some similar signs of housing market weakness in other regions as well. For example, in Canada, home prices fell month over month in January and at a faster pace than they did in December of last year. Nevertheless, though, what should investors know when it comes to the implications of the weak housing market? Well, for one, housing is only a very, very small piece of the broader real estate market. In fact, when you look at listed real estate, it encompasses everything from malls to senior living facilities to data centers to self- storage. And so, even though there might be some weakness in the residential housing sector, we continue to believe that listed real estate can still play a key role in diversifying investors portfolios. Not to mention, listed real estate also continues to have better valuations against traditional equities. So, we continue to think that investors could benefit from considering using listed real estate as a way to diversify their portfolios. Thanks so much for tuning in and for the investors who were celebrating earlier this week, the start of the year of the horse, happy new year and we will see you next time on Market Weekend Review. >> Hi, I'm Sophie Anton, head of portfolio and business consulting at Russell Investments. If you liked what you just saw and heard, consider subscribing to our YouTube channel or check us out on LinkedIn. Thanks for tuning in.