Macquarie Economist Sees Final Bank of Canada Rate Cut Next Week After CPI Data

12:42 PM EDT, 10/21/2025 (MT Newswires) -- Canada's inflation measures, released on Tuesday, were steady in September, said David Doyle, head of economics at Macquarie.

Trim/median averaged +0.23% month over month and were boosted by food and energy prices. Traditional core (excluding food/energy) was 0.19% month over month and 2.4% year over year. Headline inflation rose to 2.4% year over year, with a spike in the gasoline price largely responsible.

This effect is likely to reverse with October's data release, stated Doyle.

Underlying measures are likely to moderate further ahead, predicted the economist. The output gap is sizeable with mounting evidence of labor market softness. The Bank of Canada's Business Outlook Survey (BOS) released on Monday suggested a subdued outlook, soft growth expectations and weak demand.

Shelter disinflation has further to run, added Doyle. Weak market rents, soft housing activity, and challenged home prices should feed through into measured inflation over time. Base effects suggest year-over-year measures are likely to moderate ahead.

Doyle continues to see a BoC 25bps cut ahead at the Oct. 29 policy meeting. While the OIS market-implied probability fell to 65%, the Macquarie economist estimates the odds of this as higher at 80%.

Beyond this, the outlook becomes murkier in Doyle's view. While Macquarie's base case remains that next week will mark the final cut, risks lie in the direction of further easing, with another 25bps cut possible in either this December or January 2026.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.