Archive

October 29, 2025
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BoC Cuts to 2.25%: End or Pause?

  • The Bank of Canada cut its policy rate by 25bp to 2.25%, matching the consensus, and signals the current rate is about right to sustain 2% inflation.
  • Structural damage from tariffs limits further monetary easing. Fiscal policy is expected to carry the economic support burden ahead.
  • Economists are divided: some see the cycle complete at 2.25%, others forecast further cuts to 1.75-2.0% if growth disappoints materially.
September 17, 2025
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BoC Cuts Amid Trade War Damage

  • The Bank of Canada cut the overnight rate by 25bp to 2.5% amid 7.1% unemployment and a 1.6% Q2 GDP contraction from US tariffs.
  • Core inflation remains elevated, with the CPI rate at 1.9% but preferred measures around 3%, constraining aggressive easing despite growth weakness.
  • The BoC's forward guidance signals it is "proceeding carefully" with October cut probability around 60%, and the terminal rate at 2.25%.
July 30, 2025
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Canada: Policy Rate Held At 2.75% (Consensus 2.75%) in Jul-25

  • The Bank of Canada held its policy rate at 2.75% as expected, but disappointed dovish expectations. The decision reflects competing inflation and growth pressures.
  • Underlying inflation has risen to 2.5-3.0%, remaining well above the 2% target due to persistent cost pressures. This has shifted the Bank's priority toward price stability over accommodation.
  • Future rate cuts require both economic deterioration and contained tariff-related cost pressures. The Bank's scenario-based approach reflects unprecedented trade policy uncertainty.
June 04, 2025
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Canada: Policy Rate Held At 2.75% (Consensus 2.75%) in Jun-25

  • The Bank of Canada held its policy rate at 2.75%, as expected, but disappointed market participants who anticipated a dovish signal or rate cut, reflecting a cautious, data-dependent stance.
  • Firmer-than-expected core inflation and persistent tariff-related cost pressures have offset the disinflationary effects of a softening domestic economy, prompting the Bank to be vague and non-committal about the potential for further rate cuts.
  • The interest rate outlook remains highly uncertain, with future policy decisions hinging on the evolution of inflation, domestic demand, and the unpredictable trajectory of US trade policy.

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