Morningstar on How Much The Bank of Canada Will Cut Rates This Year

11:03 AM EDT, 06/26/2025 (MT Newswires) -- While an end to tariff uncertainty with the United States is good news for both the economy and investors, economists say it could also result in less aggressive interest rate cuts from the Bank of Canada, noted Morningstar.

A growing number of economists have already recalibrated their expectations, predicting two more cuts by year-end instead of three, said Morningstar.

Analysts say that instead of the trade war, domestic economic indicators -- the mounting jobless rate, economic slack, and weaker consumer and business spending -- will steer the BoC's next rate move.

Canada's central bank has held off on cuts twice in a row, monitoring macroeconomic developments rather than react to them, pointed out Morningstar.

There is another shift afoot concerning the terminal rate of the easing cycle, it added. Any possibility of the central bank cutting rates below 2.25% -- the lower end of its neutral range -- is all but ruled out, as observers come around to the sense that the BoC's monetary easing cycle may have run its course.

Though their pool is dwindling, there are still some analysts who expect policymakers to cut below the neutral range, lowering the rate to 2%.

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