The Twenty-Four
“At this decision there was a clear consensus to hold our policy rate unchanged”
—Tiff Macklem, July 30, 2025 Press Conference
“Don't you know, things can change
Things'll go your way
If you hold...on for one more day”
—Hold On, Wilson Phillips
The Bank of Canada’s decision to hold its policy rate at 2.75% for the third straight meeting shocked almost no one, including us. It was our call.
The Bank is content to wait it out for now, looking for more progress on inflation before cutting again.
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Implications
Our view from our last quarterly economic outlook was that a slowing population in combination with steady employment gains would help rebalance the labour market. The September report supports this view, with the unemployment rate falling.
A key question is what happens if major projects proceed. Our forecast did not factor in the proposed Pacific Link or Pathways projects, but still had the unemployment rate falling to 5.9% in 2028. This week we asked the question, in a two-part series, “Who will build” if all these projects proceed amid slowing population growth, an aging workforce, and existing vacancies in the construction trades. Part 1 covers demographics, and Part 2 discusses the construction industry and trades.
The Bank of Canada kept its finger on the pause button at 2.25% last month and the next update is scheduled for October 28. Given today’s soft jobs report and indicators pointing to a Q3 slowdown, our base case view is that the Bank remains on the sidelines this year. However, they are keeping a close eye on elevated inflation readings and the balance of risks is tilted towards hiking. We currently have two rate hikes built into our forecast for next year.
The trivia section will be in The Seven coming out later today.
Economics News