Central bank signals limited room for further easing amid persistent economic uncertainty
The Bank of Canada's decision to lower interest rates by 25 basis points on October 29 was swayed by persistent economic weakness and the ongoing fallout from United States trade protectionism, minutes from its last meeting show.
The central bank's meeting notes revealed that the effects of US protectionism have rippled through the Canadian economy, dampening business investment and hiring.
“Hiring across the economy was weak, as was business investment,” the governing council said.
While consumer spending and housing activity showed resilience—with housing starts and resales up since spring—regional disparities persisted and overall consumption growth was expected to remain modest.
RBC economist Rachel Battaglia says Canada’s new immigration rules may slow population growth, easing rental demand while reshaping housing and mortgage markets. https://t.co/1xQepWC8pp
— Canadian Mortgage Professional Magazine (@CMPmagazine) November 11, 2025
The housing sector, a key driver for mortgage professionals, has been buoyed by accommodative financial conditions. However, members cautioned that “people who are worried about their jobs would likely be cautious in their spending,” reflecting broader uncertainty in the labour market.
The unemployment rate rose to 7.1% in September, up from 6.6% earlier in the year, with job losses concentrated in trade-exposed industries.
Inflation remains sticky as risks persist
Inflation ticked up to 2.4% in September, driven mainly by gasoline prices, but core measures remained elevated.
The Council noted that “underlying inflation was still around 2½%,” and flagged that year-over-year readings would be volatile in the coming months due to tax changes and the elimination of the consumer carbon tax.
Despite the rate cut, the Bank signaled that monetary policy was “likely close to the limits of what it could do to support the economy in the current circumstances.”
The Council emphasized that further moves would depend on incoming data, particularly regarding inflation and labour market conditions.
Mortgage industry faces new normal
The Council acknowledged that the Canadian economy is on a “permanently lower path,” with GDP expected to be about 1.5% below earlier forecasts by the end of 2026.
Structural adjustments, such as supply chain shifts and new trade patterns, are expected to take time, and monetary policy alone cannot offset all the challenges.
For mortgage professionals, while lower rates may offer some relief, the broader environment remains fraught with uncertainty.
“We believe the current policy rate is at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment,” the Council members said.
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