What economists are saying about the Bank of Canada decision and chance of further rate cuts

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Canada, meanwhile, “is going to need all the help it can get,” said Rosenberg, who expects more rate cuts to come and noted that in the past five Bank of Canada easing cycles over the last 25 years, “not once did the central bank stop north of two per cent.”

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He also noted that high uncertainty was no longer a constraint on the Bank of Canada as it was through the spring and summer. “As Jay Powell put it last December, elevated uncertainty is akin to walking in a dark room with furniture, which means that the central bank stands still so as not to get tripped up. Well, someone turned on a lamp for Tiff Macklem today,” he said.

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‘Slightly stimulative position’: Oxford Economics

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The central bank justified the cut “by focusing on the mounting evidence that the economy is softening and upside risks to inflation have eased,” Tony Stillo, director of Canada economics at Oxford Economics, and senior economist Michael Davenport, said in a note.

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“The statement also emphasized that although underlying inflation remains in the mid two per cent range and uncertainty persists, lower Canadian counter tariffs have reduced the upside risks to inflation enough for the Bank of Canada to be comfortable easing policy.”

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However, the central bank “struck a somewhat cautious tone” in its statement. “It stressed that still elevated trade policy uncertainty and the ongoing risks to inflation from potential supply chain issues and higher costs due to the trade war mean that it must remain less forward-looking than usual,” Stillo and Davenport said.

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The rate cut brings monetary policy into “slightly stimulative position in our view,” they said, but still within the Bank of Canada’s neutral range of 2.25 per cent to 3.25 per cent. However, the economists don’t see this as the beginning of a new cutting cycle in which rates “fall deeply into stimulative territory.”

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“The central bank remains in a bind as it weighs the upside risks to inflation against the downside risks to growth from the trade war,” they said. “Moreover, major fiscal stimulus is likely to be laid out in the federal budget this fall, which will do most of the heavy lifting to support the economy in the near term.”

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Rate cut not a ‘one-and-done scenario’: TD Economics

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In a note on Wednesday, Andrew Hencic, director and senior economist at TD Economics, said one phrase in the Bank of Canada statement stood out: “Governing Council is proceeding carefully, with particular attention to the risks and uncertainties.”

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“This will help rein in market pricing from becoming overly aggressive on rate cut expectations,” Hencic wrote. “But, at the same time, we have long maintained this would not be a one-and-done scenario for the central bank.”

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Hencic said “risks appear disproportionately on the downside” for economic slack to persist. He added that there is “little reason to believe there will be quick resolution to trade issues,” especially after the U.S. initiated an early review of the Canada–United States–Mexico Agreement (CUSMA) ahead of the 2026 timeline.

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Hencic said the Bank of Canada has space to trim rates further “with core inflation metrics softening and the labour market showing visible strains,” and expects another 25-basis-point cut at the next announcement on Oct. 29.

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“The ball goes into the government’s court with their budget on November 4,” he said. “The Bank of Canada will factor in spending and other initiatives for the decision in December.”

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‘Modicum of optionality’ around path forward: RSM Canada

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“A weaker economy, growing labour slack and softer oil prices created the conditions under which the central bank can confidently look through a likely short-term increase in inflation,” Joseph Brusuelas, chief economist at RSM Canada, said in a note. “This also sets the stage for future rate cuts to provide accommodation for Canada’s economy.”