BoC Poised to Ease Again Despite Rebound In Jobs And Headline Inflation
- Policymakers expected to deliver second successive cut - Labour market remains ‘soft’ amid trade headwinds - Underlying inflation outlook set to deteriorate - Further easing likely as risks stay elevated - Decision due 13:45 GMT/09:45 EST - Press conference set for 14:30 GMT/10:30 EST
Of the two North American central bank decisions on Wednesday, the Bank of Canada announcement is expected to be the more contentious.
The Governing Council is widely anticipated to lower its overnight rate by 25 basis points to 2.25%.
JP Morgan’s Bennett Parrish argued that the case for further easing rests largely on evidence that economic activity has continued to soften through the second half of the year. “Despite a surprising rebound in employment in the September labour force survey, job losses persisted in trade-exposed sectors and the unemployment rate held at a cycle-high 7.1%—prompting [BoC Governor Tiff] Macklem to characterise the labour market as ‘soft’,” he said.
The most recent inflation data tested the resolve of the bank’s doves after hotter-than-expected September data. Headline CPI rose to 2.4%, two tenths above forecasts and up from 1.9% previously. Core inflation readings were mixed: the median measure climbed to 3.2% y/y, while the trim measure rose to 3.1% y/y, both marginally above expectations.
Analysts at the National Bank of Canada said that while headline and core inflation were elevated, momentum measures remained more encouraging. “Thus, the BoC is unlikely to change its view that ‘underlying’ inflation is running around 2.5%."
Updated forecasts
Alongside the rate decision, the Bank will update its economic projections in the Monetary Policy Report. Macklem has indicated that staff will return to publishing a single baseline forecast, replacing the tariff-scenario framework currently in place.
Parrish added that updated projections are likely to mirror the previous baseline, but with continued emphasis on heightened risks. “President Trump’s decision to walk away from trade talks and threaten higher tariffs on Canada reinforces that message.”
Market pricing
Short-term rate markets are pricing in around an 85% probability of a cut in October, with odds of another quarter-point reduction at roughly 30%.
NBC’s Ethan Currie said his bank does not see this move as the end of the cycle and expects at least one more cut. “Incoming data will continue to guide the path forward, and the federal budget could also have sway, but we see fiscal policy impacts being more of a medium-term story.”
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- Policymakers expected to deliver second successive cut
- Labour market remains ‘soft’ amid trade headwinds
- Underlying inflation outlook set to deteriorate
- Further easing likely as risks stay elevated
- Decision due 13:45 GMT/09:45 EST
- Press conference set for 14:30 GMT/10:30 EST
By Harry Daniels
LiveSquawk News
@HarryDaniels71
29 October 2025 | 20:00 GMT
Of the two North American central bank decisions on Wednesday, the Bank of Canada announcement is expected to be the more contentious.
The Governing Council is widely anticipated to lower its overnight rate by 25 basis points to 2.25%.
JP Morgan’s Bennett Parrish argued that the case for further easing rests largely on evidence that economic activity has continued to soften through the second half of the year. “Despite a surprising rebound in employment in the September labour force survey, job losses persisted in trade-exposed sectors and the unemployment rate held at a cycle-high 7.1%—prompting [BoC Governor Tiff] Macklem to characterise the labour market as ‘soft’,” he said.
The most recent inflation data tested the resolve of the bank’s doves after hotter-than-expected September data. Headline CPI rose to 2.4%, two tenths above forecasts and up from 1.9% previously. Core inflation readings were mixed: the median measure climbed to 3.2% y/y, while the trim measure rose to 3.1% y/y, both marginally above expectations.
Analysts at the National Bank of Canada said that while headline and core inflation were elevated, momentum measures remained more encouraging. “Thus, the BoC is unlikely to change its view that ‘underlying’ inflation is running around 2.5%."
Alongside the rate decision, the Bank will update its economic projections in the Monetary Policy Report. Macklem has indicated that staff will return to publishing a single baseline forecast, replacing the tariff-scenario framework currently in place.
Parrish added that updated projections are likely to mirror the previous baseline, but with continued emphasis on heightened risks. “President Trump’s decision to walk away from trade talks and threaten higher tariffs on Canada reinforces that message.”
Short-term rate markets are pricing in around an 85% probability of a cut in October, with odds of another quarter-point reduction at roughly 30%.
NBC’s Ethan Currie said his bank does not see this move as the end of the cycle and expects at least one more cut. “Incoming data will continue to guide the path forward, and the federal budget could also have sway, but we see fiscal policy impacts being more of a medium-term story.”