Is a rate cut coming in 2025? Here’s what to watch in the next few weeks and months

As inflation slows and consumer spending stalls, many Canadians are wondering when — or if — the Bank of Canada (BoC) will finally cut interest rates.

While a rate cut at the next policy announcement on July 30, 2025, seems unlikely, experts are watching several key indicators to assess whether a move is coming before the end of the year.

Here’s what to track — and what it means for your money.

1. Inflation trends

The Bank of Canada’s primary job is to keep inflation within a target range of 1% to 3% (with 2% often cited as the ideal target). In June 2025, inflation rose by 1.9%, comfortably within that band. But rate decisions aren’t just about hitting the target, they’re about maintaining momentum. For that reason, the BoC will be watching:

• Core inflation (excluding food and energy): If it stays soft, the BoC may lean toward easing
• Month-over-month changes: Flat or negative readings could build the case for a rate cut (even a small quarter percent may be enough to prompt an economic uptick)

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2. Labour market strength

A strong job market usually makes the Bank less inclined to cut rates. In June, employment rose and the jobless rate dipped — signs that Canadians can handle current borrowing costs. But the BoC is also aware that many of these jobs were part-time — meaning full-time, secure employment is still eluding many capable working-age Canadians. In the weeks and months to come, watch for:

• Unemployment rate spikes, especially among youth or part-time workers
• Wage growth trends (if paycheques flatten or shrink, pressure builds to ease rates)

3. Consumer spending and debt strain

The BoC’s own surveys show Canadians are delaying big purchases and saving more. Mortgage renewals at higher rates are squeezing household budgets, and consumer debt delinquencies are climbing. In a recent Money.ca survey, approximately two-thirds (64%) of respondents identified "cost of living" as their primary economic concern — surging ahead of other concerns including debt, higher interest rates and even job security.

In the weeks and months to come, watch for:

• Retail sales and consumer confidence reports
• Credit card and personal loan default data, especially from banks and Equifax
• Mortgage renewal statistics, particularly among variable-rate borrowers

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4. Business sentiment and investment

According to the Bank of Canada’s latest Business Outlook Survey, confidence remains “subdued.” Many firms are absorbing rising costs instead of raising prices, but margins are tight. They’re also holding off on expansion due to trade tensions with the U.S.

As a result, Bank analysts and economic experts will be watching:

• Capital expenditure data — if businesses freeze spending, it signals weakness
• Export figures — impacted by tariffs and U.S. trade uncertainty

5. International developments

Global factors, especially U.S. monetary policy and ongoing trade negotiations, heavily influence the BoC’s direction. A stable trade deal with the U.S. — or an aggressive rate cut by the Federal Reserve — could nudge Canada toward its own move.

Watch for:

• Federal Reserve decisions (especially if they cut before fall)
• Canada–U.S. trade updates — clarity on tariffs and regulations could boost confidence

What it means for you

If the Bank of Canada cuts rates later this year, Canadians could see:

• Lower mortgage rates, especially variable-rate products.
• Cheaper loans, including car loans and lines of credit.
• Reduced savings account returns, which could impact retirees or those living off interest.
• A weaker Canadian dollar, possibly increasing the cost of imports and travel.

Bottom line

The July 30, 2025, Bank of Canada rate announcement is likely to result in a rate hold, but that doesn't mean the Bank if finished with rate cuts in 2025. If inflation stays tame and economic growth continues to soften, a rate cut could arrive as early as fall. Until then, Canadians should brace for a cautious wait-and-see approach from central bankers.