Scotiabank Sees Bank of Canada Cutting Rates by 25bps This Week

11:28 AM EDT, 10/28/2025 (MT Newswires) -- Wednesday will offer the full deal from the Bank of Canada when it releases a suite of updated communications and forecasts to accompany the latest rate decision, said Scotiabank.

The policy statement at 9:45 a.m. ET will be accompanied by Governor Tiff Macklem's written opening remarks to his press conference, along with the October Monetary Policy Report. A full press conference ensues at 10:30 a.m. ET.

Pretty much everybody expects the BoC to cut by 25bps, bringing the overnight rate to 2.25%, noted the bank.

A reduction would bring cumulative easing from the 5% policy rate peak to 275bps of cuts. At 2.25%, the overnight rate would be basically zero in inflation-adjusted terms, or even negative -- depending upon whether Scotiabank uses trailing consumer price index inflation or core inflation, or measures of expectations drawn from surveys of forecasters, businesses and consumers.

The way to balance the pros and cons to a rate cut at this week's meeting may be through a generally neutral-hawkish sounding and noncommittal bias, added the bank. That could be as simple as continuing to strike

out the reference in the July statement to how "there may be a need for a reduction in the policy interest rate" as the BoC did in the September statement, or strengthening this message in such a fashion as to indicate more gradual assessments in future.

As for balance sheet measures, the BoC's policy toolkit and market developments have succeeded in tamping down the spread between the market measure of the policy rate (CORRA) and the policy rate itself, according to Scotiabank. This likely implies no need for further adjustments at this time, as the BoC monitors any spillover effects into Canadian funding markets from what the Federal Reserve may do later on Wednesday.

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