Desjardins Says BoC's 'Summary of Deliberations' Doesn't Change Rates Story For It

02:31 PM EDT, 10/01/2025 (MT Newswires) -- There were several developments since the July Monetary Policy Report that pushed the Bank of Canada to resume an interest rate easing cycle in September, even as there were some arguments in favour of keeping policy unchanged, while Governing Council members didn't offer any clues about the future path, said Tiago Figueiredo over at Desjardins after reading the central bank's latest 'Summary of Deliberations'.

According to Figueiredo, softening of the labour market, particularly in parts of the economy that were not as trade exposed "startled" Governing Council. He noted: given that survey data pointed to subdued hiring intentions, policymakers were worried that ongoing "uncertainty about U.S. trade policy could lead to further labour market weakness across the economy". And outside of the labour market, the latest inflation data also suggested that one, upward momentum in core inflation had dissipated, and two, the federal government's decision to remove most retaliatory tariffs meant less upward pressure on prices going forward. While members agreed that upside risks to price growth had diminished, they had not gone away, Figueiredo noted.

Governing Council viewed the strong consumption growth in the second quarter as a potential indicator of stronger economic momentum going forward, Figueiredo said, before adding they pointed to past rate cuts as potential drivers of that strength and reiterated that past rate cuts were still spreading through the economy.

But, Figueiredo said, the Governing Council noted that easing trade uncertainty would likely mean policymakers would present a baseline projection at the October MPR. Governing Council emphasized that they would continue to look over a shorter horizon than usual. "Today's release doesn't change the story for us and we continue to see the balance of risks skewed towards further easing. As such, we anticipate that policymakers will lower the overnight rate to a trough of 2.00%," he added.

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