The Bank of Canada (BoC) is expected to lower its overnight rate by 25 basis points to 2.50% on September 17, marking a return to monetary easing as Canada’s economy shows signs of strain.
A Reuters poll conducted between September 9–12 found that nearly 80% of economists (25 out of 32) anticipate a cut this month, with most also predicting at least one additional reduction before year-end. The central bank has held rates steady since March after slashing them by 225 basis points earlier this year, one of the sharpest easing cycles among the G10.
The decision comes amid troubling economic signals. Canada shed 65,500 jobs in August, driving unemployment to its highest level in nine years outside of the pandemic. Meanwhile, the economy contracted by 1.6% in the last quarter, hit hard by U.S. tariffs on Canadian steel, aluminum, and automobiles. The weak data has pushed the Canadian dollar lower and intensified bets on more aggressive easing.
“August’s job print should give the BoC more conviction that the outlook has softened and supports our view for cuts in both September and October,” said Robert Both, macro strategist at TD Securities.
The BoC’s expected move aligns with the U.S. Federal Reserve, which is also forecast to cut rates for the first time this year on September 17.
Economists argue that while not all economic indicators are negative, persistent labour market weakness and slowing activity leave the central bank little choice but to act.
