TSX Closer: Another Record High After the BoC Delivers a "Well-telegraphed, Widely-expected" Hold On Rates

04:29 PM EST, 12/10/2025 (MT Newswires) -- The Toronto Stock Exchange closed at a fresh record high on Wednesday, this time after the Bank of Canada, as RBC put it, delivered a "well-telegraphed, widely-expected" hold on rates, although the balance of risks was seen to have shifted from hold/cut possibilities to hold/hike.

The S&P/TSX Composite Index closed up 246.48, or 0.8%, to 31,490.85, topping the previous record close of 31,477.57 set on Dec. 4. Among sectors, Info Tech was up more than 1.6%, while both the Battery Metals Index and Base Metals were about 1.5% higher. Of decliners, Telecom was down more than 1%, while Utilities and Health Care were modestly lower.

Earlier today the Bank of Canada held the key benchmark interest rate at 2.25%, as was widely expected.

BMO Economics in a note said apart from an improved economic backdrop, a key reason the Bank of Canada is content to move back to the sidelines is that current rates "may provide enough support to offset the effects of the trade war and immigration curbs, while still allowing inflation to return to target". Such comments are likely to be music to the ears of investors and may have been a factor in market sentiment today.

For its part, RBC noted the benchmark rate is at the bottom of the neutral range, where it expects the rate will remain through the end of 2026.

RBC noted the decision comes after upward GDP revisions in the Q3 GDP release dating back to 2022, and a string of positive labor market surprises that saw a key indicator of the output gap, Canada's unemployment rate, drop from 7.1% in September to 6.5% in November. "As much as recent data has been encouraging," RBC said, "we see it as reaffirming our cautiously optimistic base case rather than a fundamental shift in the Canadian economic outlook, and continue to expect a gradual recovery in the economy and labour market supported by the 275 bp rate reduction from the BoC since June 2024."

That outlook, RBC noted, broadly aligns with the BoC's. Governor Macklem said in the press conference to expect modest growth and slow absorption of economic slack, while reiterating the BoC's holding bias.

Looking back, RBC said, Canadian economic growth has already tracked toward the more optimistic end of the range of possibilities that the BoC projected in April, thanks to a combination of CUSMA exemptions shielding the bulk of goods exports to the United States, and underlying resilience in household spending. "With that, we think the BoC is done with rate cuts, and that the next change in interest rates is more likely to be a hike. Our base case assumes this won't occur until 2027, but risks are tilted toward an earlier move."

In a separate 'Canada Rates Strategy' note, RBC said it was highly unlikely the BoC language today was going to tilt to the hawkish end of the spectrum and add fuel to the rate hike pricing fire. Indeed, RBC noted, the BoC "held the line", delivering a broadly similar message on the bigger picture outlook and stance of monetary policy. According to RBC, the BoC downplayed the string of good data , including GDP and employment, which was dovish versus market fears, but it didn't actively push back against hike pricing. RBC said the muted reaction in yields; a small down tick versus the large spike recently, underscores either (or both) investor apprehension in adding duration against a balance of risks that has shifted from hold/cut possibilities to hold/hike positioning. From RBC's lens the balance of risks around monetary policy has not changed. RBC still thinks there is a 50% chance the BoC is on hold in 2026, 40% chance the BoC hikes in the second half of 2026 and 10% of a cut.

Elsewhere, David Doyle, head of economics at Macquarie Group, said the BoC's forward guidance remained neutral, but rhetoric tilted "hawkishly" relative to October, a development he had outlined in a preview note. "This tilt, however, may have fallen short of market expectations which slightly retraced their expectations for hikes ahead," he added.

In Macquarie's view, Governor Macklem and the BoC were attempting to avoid a continuation of the recent rapid pricing move, rather than pushing back against it. Looking ahead, Macquarie anticipates a prolonged pause from the BoC over the next year, before a rate hike occurs in Q4 2026. "In the months leading to this, however, we suspect rhetoric will move in a hawkish direction given the economic improvement we anticipate and the potential for a sharp fall in unemployment due to immigration policy changes," Doyle added.

Of commodities, gold was last seen higher Wednesday, while silver prices continued a record run up on tight global supply as the Federal Reserve's policy committee, as expected, cut U.S. interest rates by 25 basis points. Gold for February delivery was last seen up $19.90 to US$4,256.10 per ounce.

But West Texas Intermediate oil rose on Wednesday despite a smaller than expected drop in U.S. inventories last week. WTI crude oil for January delivery closed up $0.21 to settle at US$58.46 per barrel, while February Brent oil was up US$0.31 to US$62.25.

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