Erik Hertzberg
(Bloomberg) – Two of Canada’s largest lenders have changed their forecasts and are now seeing Canadian banks cut borrowing costs later this month after a poor job report expected.
Nova Scotia and Montreal Bank said they expect a quarter of the central bank’s central bank to raise policy interest rates to 2.5%, a consensus among most of the country’s largest lenders. Royal Bank of Canada economists still want officials to keep borrowing costs stable.
The call changes occurred when Statistics Canada report showed the country provided more than 106,000 jobs in July and August, with the unemployment jumping to 7.1 per cent, up 40 basis points from the same period last year.
Doug Porter, chief economist at Bank of Montreal, said the slack in the labor market “will eventually corrode basic price pressures, and prices are obviously not low enough,” said Doug Porter, chief economist at Bank of Montreal.
“Monetary policy does not really solve the trade war, but it can provide important support to the rest of the economy in amidst deep and sustained uncertainty,” he said.
After the data was released, Canadian bonds gathered across the curve, consistent with weak U.S. job reports. Overnight traders bet on lower interest rates north of the border with as much as 90%.
Bank of Canada Governor Tiff Macklem has kept lending costs steady for the past three meetings, but policymakers have kept further monetary easing open as the economy continues to weaken and with price pressures.
Exports and investment fell in the ongoing trade dispute with the United States, Canada’s economy grew at 1.6% annually in the second quarter, and while the core measures of inflation increased, the annual change in price pressure was below the central bank’s 2% target. Inflation data for August should be a day before the bank’s September tax rate decision.
Scotiabank is expected to cut back to back quarter points in the bank’s next two meetings. Economist Derek Holt said in a note to investors that officials are unlikely to move from the off-market to provide only one-hit stimulus.
“A cut is not worth the little Marklem gets up and delivers because the impact is very little and the market will force him to move on.”
– With the assistance of Mario Baker Ramirez.
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Last modified: September 6, 2025
