Here's what economists say about rate cut chances after latest GDP slide

Canada’s economy took another step back in October, raising fresh questions for mortgage professionals about how long subdued growth and softer demand might persist.

Statistics Canada reported that GDP contracted by 0.3% month over month, with output down in 11 of 20 industries. Goods production fell 0.7%, led by a 1.5% drop in manufacturing and a 0.6% pullback in mining, oil and gas, while services output slipped 0.2%.

Advanced guidance pointed to only a 0.1% rebound in November, implying essentially flat growth for the fourth quarter.

CIBC economist Andrew Grantham said the economy “appears to have slipped into reverse again during the fourth quarter, as a decline in activity during October was followed by only a partial recovery in November's advance estimate.”

He added that “growth in the second half of the year still appears slightly higher than the Bank of Canada assumed in October's MPR projection,” and that today’s data “doesn't change our forecast for the Bank of Canada overnight rate to remain steady at its current level for the foreseeable future.”

Soft growth, firm hold

TD Economics’ Marc Ercolao highlighted the breadth of the slowdown, noting that “11 of 20 industries registered a decline on the month,” with goods industries reversing out the prior month’s gain while services “contracted by a smaller 0.2% m/m.”

He said “overall economic growth will remain subdued over the next quarter or two before gradually recovering over the medium-term,” and that the data did not appear likely to shift the central bank from its current stance.

BMO senior economist Robert Kavcic struck a similar tone. “All told, this is pretty soft momentum to start off Q4,” he wrote, warning that the economy “has some work cut out to avoid another negative print for the final quarter of the year” and that this would “close out a very choppy year for Canadian growth in still-choppy fashion.”

Little appetite for more cuts

For markets focused on the Bank of Canada’s next move, economists generally framed the GDP stumble as another sign of slack, not a trigger for renewed easing.

“This is unlikely to materially change the outlook for monetary policy,” said Stephen Brown, deputy chief North America economist at Capital Economics.

“Nonetheless, the economy's lack of momentum reinforces our view that markets have gotten ahead of themselves in terms of pricing in interest rate hikes for next year.”

Oxford Economics’ Michael Davenport warned that “the Canadian economy is skating on thin ice in Q4… we expect weak underlying momentum to carry through H1 2026,” pointing to persistent tariff uncertainty and the lagged impact of past rate increases on households and investment. 

The Bank of Canada’s final rate decision of 2025 noted that the policy rate ended the year a full percentage point lower than a year earlier, after four 25‑basis‑point cuts, as the Bank sought to support an economy buffeted by tariffs and softening growth.

Growth remains too weak to re‑ignite demand, but not weak enough to force another rapid round of rate cuts. That left borrowers and lenders facing a protracted period of subdued activity, modest relief on servicing costs and an economy still working through “choppy” adjustment rather than any quick return to robust expansion.

CMP

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