CIBC Comments on Economic Forecast, Market Reaction to The Bank of Canada Monetary Decision

12:00 PM EST, 12/10/2025 (MT Newswires) -- The Bank of Canada left the overnight rate unchanged at 2.25% on Wednesday and reiterated that it believes that rates are at about the right level to keep inflation close to 2%, said CIBC.

Policymakers downplayed recent upside surprises in the macroeconomic data in the statement, pointing to only some signs of improvement in the labor market, with trade-sensitive sectors still weak and hiring intentions muted, noted the bank.

The BoC also cited that final domestic demand was flat in Q3, with the headline upside surprise in gross domestic product driven by volatility in trade, which is set to cause activity to swing in the other direction in the Q4 GDP report.

Canada's central bank remains data dependent, with the governor stressing in the press conference that policymakers would respond to material changes in the outlook in either direction, stated CIBC.

There weren't any surprises in Wednesday's announcement, with the BoC closely watching the evolution of economic data and willing to respond accordingly, implying with either a cut or hike, depending on surprises or an accumulation of evidence that the economy is under/outperforming prior expectations, added CIBC.

However, the bank expects the overnight rate to remain at 2.25% through the end of 2026, with trade progress and the impact of past rate cuts supporting a recovery in growth over the next year, while not presenting a threat to inflation given the degree of economic slack that remains in the economy.

Bond yields fell when the statement was released as it downplayed upside surprises in recent data, and seemed to undermine the possibility of a rate hike in 2026, which markets had previously placed odds on, according to CIBC.

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