Bank of Canada Remains Cautious on Further Rate Cuts as Inflation Moderates

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Toronto | November 3, 2025 — The Bank of Canada appears ready to hit the brakes on further rate reductions, signalling that its current policy rate of 2.25% may already be close to neutral. After a cycle of three consecutive quarter-point cuts since July, the central bank’s Governing Council said in its latest statement that the benchmark rate is “about the right level,” provided inflation and growth evolve as expected.

The comment, subtle but firm, points to a new phase of caution at the Bank. While earlier cuts were designed to counter slowing output and ease mortgage burdens, policymakers now seem intent on ensuring they don’t overstimulate an economy still wrestling with sticky service-sector inflation.

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Why the Bank Is Pausing

According to the Bank’s October communications, core inflation indicators are trending back toward the 2% target, but consumer-service inflation and wage growth remain higher than ideal. The Bank projects GDP growth of just over 1% this year and 1.2% in 2026—tepid enough to justify easing, but not weak enough to demand further urgency.

In plain terms, Canada’s economic slowdown has been less dramatic than anticipated. Retail volumes are stabilizing, employment remains firm, and oil prices have offered fiscal breathing room to energy-heavy provinces. That combination gives the Bank of Canada the option to pause and observe how past cuts work their way through the system.

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Impact on Mortgage Borrowers

For mortgage holders, the pause means variable-rate borrowers are unlikely to see further relief in the near term. The prime rate—which most lenders set about 2.2 points above the BoC’s policy rate—has already fallen to 4.45% at the Big Six banks. Monthly payments for a typical $500,000 variable mortgage have dropped roughly $120–$150 since summer.

However, unless inflation undershoots forecasts, those payments may stabilize from here. The Bank’s new tone implies that the low-rate runway could end sooner than expected. Borrowers who were waiting for “one more cut” before locking into a fixed rate may now want to reassess.

Fixed-rate borrowers, meanwhile, continue to benefit from softening bond yields. The five-year Government of Canada yield has hovered near 2.3%, allowing major lenders to post fixed mortgage rates between 4.39%–4.59%. If markets sense a longer pause, these rates may firm up slightly.

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Economists React

Economists reading between the lines see the Bank’s statement as a pivot from “supportive” to “wait-and-see.”
Scotiabank strategist Jean-François Perrault described the messaging as “a mild form of forward guidance—essentially telling markets to cool expectations of another quick move.”

Others noted the timing: The Bank meets next in December, after Q3 inflation data and holiday-spending patterns are known. That gap offers a natural window to measure whether mortgage-rate transmission is slowing consumption too abruptly.

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What Borrowers Should Do Now

Experts advise focusing on affordability planning rather than short-term timing. A 0.25-point move typically changes payments by less than $15 per $100,000 borrowed—useful, but not game-changing. A better approach may be to evaluate amortization length, prepayment options, and upcoming renewal schedules.

For households renewing in late 2025 or early 2026, today’s environment presents a small but meaningful window to capture lower fixed rates before lenders fully price in the Bank’s pause. Mortgage brokers are reporting strong interest in hybrid structures—part fixed, part variable—to balance flexibility with stability.

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The Bottom Line

The message from Ottawa is restraint. The Bank of Canada wants to maintain flexibility without reigniting inflationary pressures. For mortgage borrowers, that means the easy-money era isn’t returning quickly—but neither is runaway rate stress.

In other words, the Bank is comfortable standing still for now.

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