Desjardins Sees Bank of Canada Cutting Rates Again in October, Terminal Rate to Eventually Reach 2.0%

10:21 AM EDT, 09/17/2025 (MT Newswires) -- The Bank of Canada lowered the policy rate 25 basis points to 2.50% on Wednesday, still within its estimated neutral rate range of 2.25% to 3.25%, said Desjardins.

The accompanying communications cited dissipating momentum in underlying inflation measures, diminishing fears of tariff-induced inflation ahead, and the further deterioration in the labor market seen this summer.

That said, policymakers didn't say anything about what comes next, noted the bank.

The BoC Governing Council simply stated that it will be watching the evolution of exports, business investment, employment and household spending, in addition to keeping an eye on whether the cost of trade disruptions and reconfigured supply chains are passed on to Canadian consumers.

The BoC still seems wary of assuming that all of the impacts of United States trade policy are in the rearview mirror, particularly with regard to inflation, stated Desjardins. That's left markets relatively unchanged after the rate cut announcement.

In contrast, the bank's work suggests that those fears about inflation won't materialize. As a result, Desjardins continues to believe that the BoC will cut rates again in October and ultimately take the policy rate down to a terminal rate of 2.00%.

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