Bank of Canada Will Have Plenty to Talk About at Next Wednesday's Policy Meeting, Says BMO

10:13 AM EDT, 10/22/2025 (MT Newswires) -- Investors will have some time to sit back and stew over their Bank of Canada calls ahead of next Wednesday's policy meeting, said Bank of Montreal (BMO).

According to the bank:

-- Economic growth is "limping" below potential, with the 1.6% contraction in Q2 likely to be followed by a sub-1% advance in Q3. The BoC had assumed 1.0% in the July Monetary Policy Report under the current tariff scenario.

-- The job market has been sluggish despite the strong print for September. Year-to-date employment growth has slowed to just 0.6%, allowing the jobless rate to drift up to 7.1%. The soft conditions were very clearly corroborated in the latest Business Outlook Survey (BOS).

-- Governor Tiff Macklem dropped some dovish-leaning comments late last week, noting on growth that, "it's not going to feel very good, and it's certainly not going to be enough to close the output gap".

For the BoC hawks:

-- Tuesday's September consumer price index report was on the "hot" side, with headline inflation rising to 2.4% year over year, while the trim and median core measures held above 3% year over year. When you really drill down into it, underlying core momentum still seems to be around 2.5%, but this report showed some stubbornness and landed on the hawkish side.

-- Fiscal stimulus is about to roll through the economy and, while investors won't have the federal budget until Nov. 4 -- as such it won't get built into the October MPR -- the BMO is assuming the deficit will push well into the $70 billion range and add stimulus of at least a few tenths of a percentage point.

-- A trade deal might be looming, which would take some serious uncertainty off the economy. But even APEC, which is the rumoured timing for a deal announcement, begins after next Wednesday's BoC meeting might not be conclusive.

BMO has been leaning dovish and has held the view the BoC will ultimately trim rates down further to 2%. But the Governing Council is certainly going to have a few things to talk about in its deliberations next week.

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