Economists weigh in as the Bank of Canada delivers its second straight rate cut
The Bank of Canada’s latest 25-basis-point rate cut—its second consecutive reduction—has drawn a chorus of reactions from top economists, with most agreeing that the central bank is likely to pause further easing as it assesses the economic landscape.
The BoC’s decision, announced October 29, lowered its policy rate from 2.50% to 2.25%. The central bank cited ongoing economic weakness and inflation expected to hover near its 2% target as key reasons for the cut.
“With ongoing weakness in the economy and inflation expected to remain close to the 2% target, Governing Council decided to cut the policy rate by 25 basis points,” the Bank said in its statement.
“If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment.”
Economists see a likely pause ahead
TD deputy chief economist Derek Burleton said the BoC “wanted to take out a bit more ‘insurance’ against a weakening job market.”
He pointed to rising unemployment and “fragile consumer sentiment,” noting that “the BoC continues to use a risk-management strategy towards interest rate setting. Although inflation has remained a bit sticky, the decision to cut again suggests that the central bank is more concerned about downside growth risks.”
BMO Economics’ Robert Kavcic echoed the sentiment that the BoC is likely to hold steady for now. “That’s likely it, for now, for Bank of Canada easing,” Kavcic said.
“The Bank appears to believe that the easing to date will offer support; inflation is steadily on its way back to 2%; and the usefulness of monetary policy is somewhat limited in this unique economic environment.”
He added that ongoing softness in the job market could leave the door open for another cut in early 2026, but for now, the central bank is expected to pause.
CIBC’s Andrew Grantham said the BoC “appears to be moving back onto the sidelines to consider incoming data, the impact of next week’s federal budget and the progression of trade discussions.”
He suggested that further cuts would only be justified if the economy continues to soften or if trade prospects deteriorate.
Scotiabank's Derek Holt, meanwhile, also said the Bank appears to be done for now on easing rates, describing its latest move and language as "hawkish".
What the rate cut means for mortgage holders
For Canadians with variable-rate mortgages, the latest cut means more of their payment will go toward principal rather than interest, and some may see their total payment shrink.
Fixed-rate mortgage holders, however, are unlikely to see an immediate impact, as those rates are tied to bond yields rather than the central bank’s policy rate.
Broader implications for the economy
The BoC’s move comes amid sluggish growth, a 7.1% unemployment rate, and ongoing trade uncertainty. While inflation remains somewhat stubborn, the bank expects it to settle near its 2% target over the next two years. Fiscal stimulus is also expected to play a larger role as monetary policy reaches its limits in supporting growth.
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
