BOC: MNI BoC Review-Oct 2025: Pause Seen With Rates “About Right”
We've just published our review of the October Bank of Canada meeting - Download Full Report Here
- 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.
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US 10YR FUTURE TECHS: (Z5) Corrective Cycle
- RES 4: 114-10 High Apr 7 (cont.)
- RES 3: 114-00 Round number resistance
- RES 2: 113-12/29 High Sep 18 / High Sep 11 and the bull trigger
- RES 1: 112-24/113-00 20-day EMA / High Sep 24
- PRICE: 112-17+ @ 16:50 BST Sep 29
- SUP 1: 112-01 50.0% retracement of the Jul 15 - Sep 11 bull phase
- SUP 2: 111-26 Low Aug 26
- SUP 3: 111-13+ Low Aug 18 and a key support
- SUP 4: 111-01+ 76.4% retracement of the Jul 15 - Sep 11 bull phase
Treasury futures traded lower last week and remain in retracement mode. Thursday’s sell-off has resulted in a print below the 50-day EMA, at 112-10. A clear break of this average would undermine a bull theme and signal scope for a deeper retracement. This would open 111-13+, the Aug 18 low and the next key support. Initial firm resistance to watch is 113-00, the Sep 24 high.
OPTIONS: Larger FX Option Pipeline
- EUR/USD: Oct01 $1.1600-10(E3.3bln), $1.1700-10(E2.1bln), $1.1750(E1.3bln), $1.1791-00(E1.7bln), $1.1900(E1.3bln); Oct02 $1.1695-00(E1.5bln), $1.1750(E1.1bln), $1.1785-90(E2.5bln); Oct03 $1.1700(E1.1bln), $1.1845-55(E1.9bln), $1.1875(E1.2bln)
- USD/JPY: Oct02 Y147.95-00($1.4bln), Y149.50($1.0bln)
- AUD/USD: Oct01 $0.6600-10(A$1.1bln), $0.6700(A$1.6bln); Oct02 $0.6600(A$1.7bln); Oct03 $0.6600(A$1.5bln)
US: Speaker Johnson To Keep House Recessed During 'Shutdown Week'
Jake Sherman at Punchbowl News reporting on X that House Speaker Mike Johnson (R-LA) told Republican representatives in a conference call that he intends to bring the House of Representatives back from recess next week. Keeping the lower chamber shuttered this week suggests that the only route out of a government shutdown on October 1 is a capitulation from Senate Minority Leader Chuck Schumer (D-NY) or an unlikely 'handshake' deal with President Donald Trump and Republican leaders on an 'Obamacare' subsidy vote.
- Sherman notes that Johnson said that he wants Republicans to be 'unified'. On the call, he expressed 'confidence' about the GOP's position -- they passed a clean CR.
- On the conference call, lawmakers were told that House and Senate GOP leadership will have a joint news conference Wednesday morning, the first morning of a potential shutdown. Johnson also advised Republican lawmakers to "eschew political events during a shutdown," likely offsetting the risk of negative publicity.
- Although there have yet to be any reported comments from Schumer, the most important figure in the shutdown standoff, Polymarket recorded a spike in the implied probability of a shutdown following Johnson's comments.
Figure 1: Government Shutdown on October 1
Source: Polymarket
