Update: CIBC and TD Both See Bank of Canada On Hold After Latest GDP Data

10:07 AM EST, 12/23/2025 (MT Newswires) -- (Adds TD Economics commentary from fifth paragraph)

As with Andrew Grantham over at CIBC, Royce Mendes at Desjardins too has noted Canada's economy posted a "material contraction" in October, with early data for November pointing to "only a partial rebound".

Mendes noted Statistics Canada's advance estimate of economic activity points to just 0.1% growth in November. Without an outsized increase for GDP in December, he said the monthly industry data suggest a modest contraction in Q4. But, he added, Desjardins' tracking for GDP by expenditure still suggests the economy might be able to eke out some growth.

He added: "This soft patch in economic data isn't surprising to us. The strength in Q3 GDP looked unsustainable. We continue to believe that the market has put too much stock in the headline third quarter GDP reading and the latest Labour Force Survey data, both of which can be very volatile. We see this weakness in economic activity continuing into early 2026 before a more durable recover[y] takes hold later in the year."

For his part, CIBC's Grantham noted today's data leaves Q4 GDP tracking a modest contraction of 0.5% annualized, signaling a further increase in slack within the economy which will dampen bets for interest rate hikes in 2026. However, he said, following the upside surprise in headline GDP seen in the third quarter, average growth for the second half of the year is still slightly better than October's MPR assumptions (1.0% vs 0.75%), and as a result this weaker momentum will have to continue into the New Year to reawaken talk of interest rate cuts. CIBC continues to forecast no change to the Bank of Canada's overnight rate in 2026.

Elsewhere, Marc Ercolao at TD Economics said after the upside surprise to growth in the third quarter, today's GDP data together with November guidance indicate that fourth-quarter GDP growth is tracking "roughly flat". Ercolao added: "Tariff-impacted industries showed some strain in October after gradually recovering in prior months. The expectation is that overall economic growth will remain subdued over the next quarter or two before gradually recovering over the medium-term."

Ercolao noted the BoC doesn't make its next policy decision until January 28, and TD doesn't think today's data moves them off of their current policy stance. He also noted the BoC has acknowledged that trade-related impacts on inflation and economic growth are becoming more clear, though that doesn't lower the level of uncertainty in coming quarters as Canada and the U.S. continue to work on hammering out a trade deal. All told, TD maintain its view that the BoC has reached the end of their interest rate easing cycle.

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