MNI BoC Review-Sept 2025: Balancing Risks, Open To Cut Further

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The Bank of Canada resumed easing on September 17 after a 3-meeting hold, with a 25bp rate cut to an overnight rate of 2.50%. There was limited market reaction on net to the decision and press conference, with the BOC as expected keeping the door open to further easing as soon as the next meeting in October, but falling short of any firm guidance to that effect. 

• The future path of rates repriced slightly to reflect the implemented cut (which had not quite been fully priced going into the meeting, reflecting a slightly hawkish move going into the release).
• While rate cut expectations diminished slightly early in the press conference after headlines reported Gov Macklem saying that they considered holding rates, this didn’t appear to be a signal as he was merely citing a formality (“I there was a clear consensus to cut our policy rate by 25 basis points. You know we as we have for the last couple of meetings, we considered two alternatives, hold the policy rate where we are, or cut the policy rate.”)
• Otherwise, attention was on whether the BOC would signal further cuts. July’s guidance suggesting that there may be a “need” to cut rates in future was removed, but overall the BOC maintained its easing bias.
• There are 21bp of cuts priced through year-end, pretty much where pricing came into the rate decision, with the next cut only fully priced by around March – and no more than 2 cuts seen through the rest of the cycle.
• Key to the October decision will be one report each of labour force and inflation data (for September) and the quarterly BOC Business Outlook Survey in the interim. In the meantime, there’s only about a one-in-three market implied probability of a follow-up cut.