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Canada: Bank of Canada cuts rates in October
Latest bank decision: At its meeting on 29 October, the Bank of Canada reduced the target for the overnight rate from 2.50% to 2.25%, following a same-sized cut in September.
Weak jobs market and mild inflation drive move: The decision to ease monetary policy was driven on one hand by a soft labor market: Employment fell in July and August, and the unemployment rate was at a multi-year high in September. In addition, inflation has been well within the Bank’s 1.0–3.0% target range in recent months.
Monetary policy likely to be unchanged ahead: Most panelists see rates on hold for the foreseeable future, though a few see one or two more 25 basis-point cuts by end-2026, and one sees a hike.
Panelist insight: On the outlook, TD Economics’ Andrew Hencic said:
“The outlook shows a gradual uptake of excess capacity and inflation stabilizing, a scenario that would suggest no more easing is required. However, despite the effects of the trade shock being better understood, the outlook is replete with uncertainty – not least because CUSMA negotiations are set to ramp up next year. Stabilization at 2.25% is our base case on where the policy rate will hold, but we acknowledge that risks abound.”
Desjardins’ Randall Bartlett concurred:
“The bar is high for further monetary policy support. We are now of the view that the BoC will keep interest rates on hold for the foreseeable future. Our baseline outlook for the Canadian economy is more positive than the BoC’s, despite the risks to the outlook remaining tilted to the downside due to the uncertainty of US trade policy.”
