BMO’s Sal Guatieri wrote, “Stubborn core inflation sets a high bar for another Bank of Canada rate cut, reducing the odds of a move on September 17.” He added that if future job and inflation reports remain subdued, the Bank could ease in October, eventually taking the policy rate down 75 basis points to 2.0% before next spring.
TD economist Rishi Sondhi argued that “domestic demand looks to have surprised on the upside. On the margin this could enhance the argument for the Bank to stand pat on rates at their September 17 meeting.” However, CIBC’s Andrew Grantham said, “We continue to think that a couple more interest rate cuts from the Bank of Canada are needed to accelerate the recovery, and assuming no fireworks in next week’s LFS figures, we forecast the first of those being delivered at the upcoming September meeting.”
Canadian banks stay calm amid mortgage jitters. Morningstar DBRS’s Carl De Souza cites strong borrower credit scores and sub-55% LTVs as proof the Big Six can weather higher renewal rates and economic uncertainty.https://t.co/32G70CzKEI
— Canadian Mortgage Professional Magazine (@CMPmagazine) September 6, 2025
Labour market weakens as trade war bites
The trade war’s impact has been especially pronounced in manufacturing, which shed 58,100 jobs over the past seven months. Professional, scientific, and technical services lost 26,000 positions in August alone. Ontario, British Columbia, and Alberta saw the largest regional job losses, while Quebec remained stable.
“Southern Ontario cities continue to shoulder the nation’s highest unemployment rates, with Windsor (11.1%), Oshawa (9.0%), and Toronto (8.9%) bearing the brunt of trade war impact,” Fan said.
Inflation concerns linger, but market expects easing
While Canada’s overall inflation rate remains below the BoC’s 2% goal, the underlying rate is tracking “moderately above the target,” Guatieri said. Desjardins Group economist Royce Mendes argued that inflation worries have been overstated by temporary factors, suggesting “it’s really time to move the inflation worries to the back burner and start focusing…on supporting the economy, with the unemployment rate near 7%.” Mendes flagged that markets may be underestimating the scope of future BoC cuts.