Respondents see the BoC’s policy rate falling from 2.75% currently to 2.25% by the end of 2025, suggesting two additional 25-basis-point cuts in the months ahead. The median forecast calls for the first cut to come by June, with rates drifting lower in the second half of the year.
The market’s median call for two rate cuts by year-end broadly matches forecasts from RBC, CIBC, and TD, which all see the Bank of Canada lowering its policy rate to 2.25% by the end of the year.
BMO and National Bank expect a slightly more aggressive easing, with the policy rate forecast to reach 2.00% by year end.
Scotiabank, which had previously forecast the Bank of Canada would hold rates steady through the end of next year, has now updated its call to reflect three quarter-point cuts in 2026. The revision comes amid a sharply downgraded North American growth outlook, driven by escalating U.S. trade tensions and weaker global demand.
“In Canada, we assume that Governor Macklem keeps rates unchanged for the remainder of the year, but this depends critically on the evolution of the global trade war, the magnitude of the decline in U.S. economic activity, and the Canadian government’s response to it,” Scotia economist Jean-Francois Perrault wrote in a recent note. “If the U.S. or Canadian economies weaken more than expected, the BoC would likely lower rates.”
The bank now expects the BoC’s policy rate to remain at 2.75% through 2025 before falling to 2.00% by the end of 2026.
Other key takeaways from the Market Participants Survey
Beyond rate cut expectations, the BoC’s latest survey highlights growing concern over Canada’s economic outlook. Participants see slower growth, moderating inflation, and an elevated risk of recession over the next year.
Key findings include:
- Recession risk: Participants assign a 40% probability of Canada entering recession within the next 12 months.
- Inflation outlook: Total CPI inflation is expected to hover around 2.4% by the end of 2025 before easing to 2.00% by the end of 2026, down from 2.30% currently.
- Growth expectations: Real GDP growth is forecast at 1.0% for 2025 and 1.7% in 2026.
- Balance of risks: Nearly 45% of respondents see risks tilted toward lower interest rates.
- Output gap: About 77% believe the Canadian economy currently has a negative output gap (with GDP below potential).
- Bond yields: 2-year, 5-year, and 10-year Canadian bond yields are projected to stay in the 2.50% to 3.00% range through 2025.
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Last modified: April 28, 2025