MNI BoC Review-Oct 2025: Pause Seen With Rates “About Right”

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EXECUTIVE SUMMARY

• Along with the expected 25bp cut to an overnight rate of 2.25%, a key phrase from the BOC’s October policy statement drove a mildly hawkish market reaction by signalling an intention to hold rates steady at upcoming meetings (vs market/analyst expectations split between a further 25bp cut or a post-October pause coming into this meeting).
• The key phrase in the statement was: "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."
• Though Governing Council didn’t close the door to another cut ("If the outlook changes, we are prepared to respond. Governing Council will be assessing incoming data carefully relative to the Bank’s forecast”), the language about rates being “about right” was repeated a few times in the post-meeting press conference, reinforcing the perception that the BOC envisages holding rates in future meetings in its base case, after having reduced policy rates by 275bp in this cycle.
• Terminal BOC overnight rate expectations concluded the press conference at around 2.15%, versus 2.12-2.13% coming into the meeting – suggesting expectations are now leaning more toward an indefinite hold rather than another cut in the cycle.
• The Canadian dollar benefited as well, with USDCAD extending losses through the press conference to move through the 1.3900 handle.
• We haven’t seen any Canada bank analyst view changes as yet. Coming into the meeting, 7 Canadian banks had been split 3/4 in favour of another cut in this cycle beyond October; BMO analysts wrote after the decision they still anticipate another 25bp reduction though we await Desjardins’ and National’s verdicts.