Bank of Canada Has A "Complicated" Task With Its Rate Decision, Says RBC

12:08 PM EDT, 09/08/2025 (MT Newswires) -- Wider path to a September cut at the Bank of Canada, but it ins't a done deal, said RBC.

Friday's Labour Force Survey isn't as bad as the headlines suggest, but not great overall, noted the bank. It's hard to argue with market pricing for an additional chance of a Sept. 17 rate cut.

The optics of two consecutive negative payroll prints and a Q2 gross domestic product contraction increase the scope for the BoC to cut in September, stated RBC. Markets are more convinced (75%-80% chance priced) than the bank is -- still slightly erring on the side of not moving now.

Markets' pricing is also being influenced by the full court press in the United States, probably worth around 5bps on September BoC pricing, stated the bank. It really depends on the BoC's starting point before the last round of data -- if they were under 50/50 to go, then this probably pushes them to a game-time decision based on the CPI report on Sept. 16.

If the BoC was biased to cut or close to 50/50, this could push it over the edge unless CPI prints very high -- core at 0.3% month over month. It is very finely balanced, added RBC.

Recent data starts reducing the chance the cycle is over and raises the chance of a couple of adjustment cuts, but September still feels a bit early, according to the bank. Why not wait until the budget for better clarity when there is mixed data, noise in H1 from trade distortions, and no burning urgency as the Canadian economy isn't falling off a cliff?

The act of the Federal Reserve cutting is irrelevant for the BoC in RBC's view.

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