Bank of Canada Poised for More Cuts After Wednesday's Rate Reduction, Rosenberg Research Says

10:00 AM EDT, 09/18/2025 (MT Newswires) -- The Bank of Canada cut its policy rate by 25 basis points to 2.50% on Wednesday, as expected, marking its first easing since March 12, said Rosenberg Research.

Rosenberg noted a series of notable shifts in the tone of the central bank's statement. The earlier view that the global economy had been "resilient" was downgraded to "slowing."

For the United States, the BoC also lowered its assessment, especially on the labour market, which it now says has "slowed" compared with being "solid" six weeks ago.

At home, the bank acknowledged the contraction in real gross domestic product, recent job losses, and softening in hiring plans, factors that, alongside a more challenging demographic profile, will "weigh on household spending" in the months ahead.

Concerns about tariffs and their potential impact on inflation had kept the BoC on hold for six months, Rosenberg said. A few months of higher-than-expected consumer price index and core CPI readings have eased, with the statement noting "the upward momentum seen earlier this year has dissipated" and that broader measures suggest underlying inflation is running about 2.5%.

The recent removal of most Canadian retaliatory tariffs on U.S. imports should mean less upward pressure on the prices of those goods, reinforcing the central bank's confidence that inflation is back on a downward path.

Rosenberg highlighted that the BoC used terms such as "weak," "soft," and "slow" at least 10 times, double the count from six weeks ago, underlining the markdown in its economic outlook.

Uncertainty is no longer described as "high," which had constrained policy in the spring and summer.

More cuts are likely, Rosenberg said, predicting the rate could fall to 2.0% or lower before the cycle ends, with futures pricing showing an 85% chance of another move by year-end.

The bank also pointed to easing wage growth, which Rosenberg called critical because sustained price inflation is unlikely without wage inflation. In the past five BoC easing cycles over 25 years, the bank has never stopped above 2.0%, a positive for the front end of the Government of Canada bond market but less so for the Canadian dollar, (CAD or loonie), according to Rosenberg.

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