CIBC on Economic Forecast, Markets' Reaction After Bank of Canada Rate Cut

12:15 PM EDT, 10/29/2025 (MT Newswires) -- The Bank of Canada cut interest rates by 25bps as expected on Wednesday, but signaled that this may be the end of the line for rate reductions, said CIBC.

The quarter-point cut, bringing the overnight rate down to 2.25%, was widely expected by forecasters and financial markets, noted the bank.

However, the accompanying statement said that the Governing Council sees the new policy rate as at "about the right level" to keep inflation at 2% while also helping the economy through a period of structural change, suggesting a willingness to respond only if the "outlook changes."

Following Wednesday's cut, the BoC appears to be moving back onto the sidelines to assess incoming data, the potential impact of next week's federal government budget and the progression of trade discussions, stated CIBC.

On the bank's base case assumptions that the economy starts to gradually recover, and that a trade deal is reached to lower some sectoral tariffs and reduce uncertainty surrounding CUSMA, Wednesday's move would be the final one.

However, further cuts would certainly be justified if the economy continues to weaken and/or if the outlook for trade doesn't improve.

Even though interest rates were cut on Wednesday as expected, bond yields rose slightly following the move as financial markets reduced the probability of further reductions in the future added CIBC.

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