EconoFACTS

October 01, 2025 | 14:11

BoC Summary of Deliberations (Sep. 17) — One Data Point at a Time

Economist

Managing Director, Canadian Rates & Macro Strategist
Fixed Income Strategy

Benjamin has been with the Bank of Montreal nearly two decades. He is re-sponsible for the Canadian macro-econom... (Read more)

Benjamin Reitzes

Managing Director, Canadian Rates & Macro Strategist
Fixed Income Strategy

Benjamin has been with the Bank of Montreal nearly two decades. He is re-sponsible for the Canadian macro-econom... (Read more)

The Bank of Canada's Summary of Deliberations from the September 17 meeting provides additional colour on the decision to cut rates by 25 bps. As they noted in the policy statement, the weakening labour market, some improvement in inflation and dropping of some counter-tariffs tilted the balance of risks for inflation toward a cut.

We already knew that the BoC considered holding rates steady, but the arguments were outlined here. Firstly, the strength in Q2 consumption suggests that consumers are holding up better-than-expected. Second, trade uncertainty was driving structural economic changes, making it difficult to assess the size of the output gap. Finally, past rate cuts are still working their way through the economy.

One notable point is the BoC highlighting that the shift in U.S. trade policy and resulting drag on investment and jobs "reflects an economy adapting to a large structural change—many sectors are adjusting to the new global trading environment. Monetary policy is not well suited to structural shocks." The last part suggests that the BoC isn't necessarily itching to cut aggressively here and that there are limits to how much monetary policy can offset trade troubles.

Potential upside from fiscal spending (federal and provincial) was noted as well, though the BoC will wait for the November 4 federal budget before incorporating that into its forecast.

Key Takeaway: Nothing here to materially move expectations for the October BoC meeting. The Bank remains focused on a "shorter horizon than usual" and will keep taking a "risk management approach". The potential for a follow-up cut in October hinges on the jobs and CPI reports released over the next few weeks.