RBC Says CPI Is Key to Bank of Canada's October Rate Cut

07:53 AM EDT, 10/15/2025 (MT Newswires) -- After the September meeting, even though the Bank of Canada appeared to be a cautious cutter, RBC highlighted that cutting after a six-month pause made another one more likely and that there was a wide path to another reduction in October.

Q3 gross domestic product is tracking close to the BoC's Monetary Policy Report estimate, the labor market is soft -- unemployment rate at the same level as when the BoC cut in September and the three-month hiring trends are at low end of historical range.

Upside inflation risks have moderated with the abandonment of many reciprocal tariffs and growing evidence of softening wages, stated the bank. A recent BoC speech also highlighted expected moderation in key drivers for underlying inflation, notably goods excluding energy and shelter services.

RBC assigns a 70% chance to an October cut. The onus is on a high consumer price index print (0.3% month over month or greater on core CPI measures) to derail an October rate reduction and weaker growth data to justify terminal dipping below 2.25%.

The BoC appears in a precautionary cutting phase with monetary maneuvers providing a bridge until fiscal stimulus takes over, added the bank.

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