Bank of Canada Is Done For The Time Being Reducing Rates, Says TD

11:26 AM EST, 11/25/2025 (MT Newswires) -- The Bank of Canada has already made substantial interest rate reductions over the past year and a half, slicing the overnight rate from 5.00% to 2.25%, said TD.

The last 100bps came in the wake of President Donald Trump's trade war and are in the early stages of working their way through the economy, noted the bank.

In the October decision, Governor Tiff Macklem was unusually prescriptive in saying that if the economy progresses in line with the BoC's forecast for just above 1% growth through 2026, inflation is likely to remain close to 2%, and further rate cuts won't be required.

What's under the hood of the steady inflation outlook merits more attention, stated TD. The BoC expects the inflationary pressure from higher costs for businesses stemming from the trade conflict to be offset by the economy's domestic weakness.

In addition, Canada's economic troubles aren't just cyclical, which is typically when rate cuts are most effective as a key policy response. A structural transition is simultaneously reducing the productive capacity of the economy.

As Governor Macklem has discussed, this confines the ability of monetary policy's blunt tool -- the overnight rate -- to boost demand. The structural challenge is best addressed by specific government policy measures to remove barriers and unlock the economy's potential.

With the BoC's updated forecast, it now lands close to TD's view from September, which remains largely unchanged. Given the highly uncertain economic environment, a future rate cut cannot be fully dismissed, but it would require an economy that's rapidly cooling relative to the BoCs already modest expectations, added the bank.

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