BMO Says Bank of Canada Likely Done Cutting Rates for Now

06:11 AM EDT, 10/30/2025 (MT Newswires) -- The clear-cut message from the Bank of Canada on Wednesday was that this might be it for rate cuts, for now, said Bank of Montreal (BMO).

In the BoC's view, recent rate cuts provide some support for the economy, while not risking the inflation target, noted the bank.

There was plenty of emphasis on monetary policy being limited when the United States tariffs have acute impacts in some areas of the economy, but little in others, pointed out BMO. Governor Tiff Macklem, to paraphrase, said: let's not turn a tariff problem into an inflation problem.

Fundamentally, this was one of the risks from day one when dealing with a negative supply shock -- in other words, tariff shock, stated the bank. That interest rates are pinned somewhat higher than they otherwise would be versus growth and job market conditions.

Two-year yields on government bonds are sitting at 2.4% and five-year yields are at 2.7%, suggesting Canada could be holding very close to neutral, added BMO.

The bank believes that ongoing softness in the job market leaves the door open for some further support, and another 25bps rate cut is still on the table for early-2026. Markets have that about one-third priced, but nothing more.

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