Employment gained again in October while the unemployment rate decreased
Even in the days before the Bank of Canada’s interest rate decision in October, there was still some speculation about what policymakers may opt to do, but things look a bit more certain ahead of the next meeting.
While the central bank ultimately decided to cut last month, taking the policy interest rate to 2.25% from 2.50%, there appears to be even fewer reasons to believe there could be more cuts to come, with big bank economists now predicting a pause.
The BoC had said that its Governing Council “sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment.” It noted that the economy is still showing some weakness and even as growth strengthens in 2026 following the weak second half of this year, it sees GDP growing by 1.2% in 2025, 1.1% in 2026 and 1.6% in 2027.
Despite the continued challenges including tariffs and the potential curveball of the upcoming federal budget, which could still require BoC intervention, economists from major FIs are expecting a pause for now; opinion boosted by 67,000 jobs added in the latest labour report and the unemployment rate ticking down 0.2 percentage points to 6.9%.
“The Bank of Canada was relatively forceful after cutting the overnight rate to the low end of the neutral range in October that additional reductions were unlikely unless economic growth and/or inflation data were to surprise significantly on the downside,” says RBC’s Nathan Janzen, noting that the jobs report did not give this concern. “The data is consistent with our own base case projections that the BoC will not cut interest rates further.”
TD’s Leslie Preston says that the jobs data reflected resilience rather than strength but “will make the Bank of Canada more comfortable to sit on the sidelines and let the 275 basis points of rate cuts in this cycle work their way through the economy.”
CIBC’s Andrew Grantham is also bearish on the trajectory for Canada’s labour market, with expectation that gains may slow again, but notes that a softer increase in population is set to bring the unemployment rate down further. “That would be in-line with the Bank of Canada's current thinking that interest rates are low enough to support a recovery withing the economy, and because of that we continue to forecast no more cuts from here,” he says.
BMO’s Doug Porter notes that October’s jobs data was boosted by demand in Ontario created by the Blue Jays’ World Series success. But this was not the only positive from the stats and he believes that with “the jobless rate dipping back below 7% and wages staying firm, it appears that the BoC will indeed pause in December.”
