Canada's Economy in a Spot of Trouble so Central Bank Should Cut Rates Next Wednesday, Says Rosenberg Research

10:48 AM EDT, 10/22/2025 (MT Newswires) -- The Bank of Canada should still be on track to cut rates at next Wednesday's policy meeting, which isn't yet fully priced in, said Rosenberg Research.

What tilts the balance for lower rates and a weaker Canadian dollar (CAD or loonie) -- stuck at C$1.40 -- is the BoC Business Outlook Survey (BOS) for Q3, which was just published on Monday, noted Rosenberg Research.

The corporate sales outlook eroded to its weakest level in two years, it pointed out.

What else does BoC Governor Tiff Macklem need to know, asked Rosenberg. Roughly one-third of businesses are planning for a recession -- up from 28% in Q2. Hiring, production, and investment plans are being frozen.

As for households, two-thirds are prepping for a recession in the coming year, principally from rising slack in the labor market.

With respect to inflation, while businesses did state that they expect their input costs to pick up due to United States tariffs and trade tensions, the key point was the comment of how "weakness in demand persists in limiting firms' ability to pass along these costs to customers," which means a margin squeeze in the broad corporate sector, added Rosenberg.

Indeed, a smaller share this quarter plan to raise their selling prices and the survey showed overall expectations to be below their early 2025 peak -- only 18% of firms expect 3%-and-higher inflation over the next two years, down from 23% in the second quarter.

According to Rosenberg, however, here is the real kicker: the BOS was conducted between early August and early September -- which means it didn't capture Canada's earlier decision to remove retaliatory tariffs on U.S. imports -- which undoubtedly will play a role in depressing inflation expectations when the next survey is released three months from now.

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