Bank of Canada Likely to Keep Policy Rate Unchanged at 2.25% Is Canadian Dollar Positive But Still Plenty of Risks, Says UBS

12:03 PM EDT, 10/30/2025 (MT Newswires) -- The Bank of Canada lowered its policy rate on Wednesday by 25bps to 2.25%, against UBS's expectation of keeping it steady at 2.50% but in line with market consensus.

This BoC forward guidance is consistent with the UBS view that it would require notable economic weakening for the Canadian central bank to continue to lower the policy rate below 2.25%, the lower end of its estimate of neutral, and where it is after Wednesday's meeting.

Canadian front-end yields rose after the announcement, with markets now pricing in only a "moderate" possibility of additional policy easing, stated the bank.

Meanwhile, USD/CAD slipped below 1.39, largely as UBS expected. While this BoC outcome is Canadian dollar-positive, there is plenty of other event risk on the horizon, including Prime Minister Mark Carney's negotiations with trading partners at the APEC summit this week and next week's Canadian federal budget release.

Assuming no significant worsening of the trade policy

front and an overall stimulative stance of fiscal policy, the bank expects USD/CAD to continue grinding lower to its revised year-end target of 1.38.

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