Canada Interest Rate Forecast 2025-2029
Last Updated: September 17, 2025
CURRENT INTEREST RATE FORECAST FOR 2025: 2.50% (last updated September 17, 2025)
 For more information about the 2025 Bank of Canada rate announcement schedule, read more here 👈
Key Takeaways (updated September 2025)
- On Wednesday, September 17, 2025, the Bank of Canada announced that it will be cutting its rate, bringing the policy rate to 2.50%.
- The negative economic outlook for the Canadian economy continues to weigh heavily on the Bank of Canada and they are cutting rates to combat slow GDP growth and rising unemployment.
2025 Predictions (updated September 2025)
Will Interest Rates in Canada Go Down in 2025?
On Wednesday, September 17, 2025, the Bank of Canada announced that it will be cutting its rate, bringing the policy rate to 2.50%.
Commentary from Perch’s CEO and Principal Mortgage Broker, Alex Leduc:
When is the next Bank of Canada rate increase and what can I expect?
The current market overnight interest rate forecast for the remainder of 2025 is:| Variable Rate Interest Forecast 2025 to 2030 (as of September 2025) | |
|---|---|
| Date | 5-year variable rates |
| 8/31/25 |
4.10% |
| 12/31/25 |
3.93% |
| 6/30/26 |
3.86% |
| 12/31/26 |
3.90% |
| 6/30/27 |
3.91% |
| 12/31/27 |
4.00% |
| 6/30/28 |
4.06% |
| 12/31/28 |
4.12% |
| 6/30/29 |
4.19% |
| 12/31/29 |
4.30% |
| 6/30/30 |
4.37% |
| 12/31/30 |
4.48% |
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How will the latest Bank of Canada interest rate announcement impact your monthly mortgage payments?
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What is the interest rate forecast for 2025 in Canada? (updated September 2025)
Commentary from Alex Leduc, Principal Mortgage Broker and CEO of Perch:
What is CPI and how does it affect the Canada interest rate forecast?
CPI stands for consumer price index and it is the measure of average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It is mainly used to measure inflation. A rising Consumer Price Index (CPI) would prompt the central bank to raise interest rates. The CPI basket includes 8 main categories of goods and services: Food, Shelter, Household operations, Clothing, Transportation, Health, Recreation, and Alcoholic beverages. CPI data is reported for various geographic areas, including Canada, provinces, and select cities, such as Whitehorse, Yellowknife, and Iqaluit.
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What affects the Bank of Canada’s interest rate forecast?Â
We look at some of the core factors that the Bank is monitoring to gauge which direction they are likely to go. In this case, all indicators seem to indicate they will hold.
- Real GDP Growth: GDP growith in Q2 of 2025 slowed to 1.2% (Source:Â Trading Economics). The Bank of Canada is expecting GDP growth of 0.8-1.6% in 2025 and -0.2-1.4% in 2026. This is below expectations and would support a cut. (Source:Â Bank of Canada)
- Inflation: Core inflation (year over year) in July was 2.6% (vs 2.7% in June), above the Bank’s 2% inflation target and is stubbornly staying in the high 2s. This would support a hold or potentially even a rate hike. (Source: Trading Economics)
- Unemployment: Remained stable at 6.9% in July (0.5% higher than 1 year ago). On an absolute level, this is considered a reasonable amount of unemployment and the generally flat trend in the past few months would justify a hold. (Source:Â Trading Economics)
What is the Canadian prime rate?
The prime rate is what major banks and financial institutions in Canada use to set interest rates for loans and lines of credit which also include variable rate mortgages.
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Is prime rate the same as mortgage rate?
The prime rate is not the same as your mortgage rate. A prime rate is the base cost of borrowing from which lenders start to determine interest rates on mortgages, personal loans, credit loans or other financial products. In general, the prime rate mostly affects variable rate mortgages. Your mortgage rate is the interest rate you are expected to pay on any borrowed money.
What are the interest rate predictions from the banks?
CIBC
CIBC Economists
Ahead of the September 17th announcement, CIBC expected the Bank of Canada to resume interest rate cuts with a 25 basis point reduction, while keeping the possibility of further easing open. The bank notes that CPI data released the day before the meeting would need to show a significant upside surprise to prevent such a move, which appears unlikely given recent weakness in the labour market and generally muted core inflation readings. CIBC also highlights that July’s economic indicators are likely to be mixed, with manufacturing and wholesale activity pointing to growth, while retail sales are expected to ease back following a strong June.
RBC
RBC noted that Canada’s economic outlook has remained more positive than expected earlier this year, with growth tracking closer to the least negative scenarios identified in the spring. While additional Bank of Canada rate cuts are not part of RBC’s base case, policymakers retain the flexibility to ease rates if needed. Net trade is unlikely to repeat its Q2 decline, household spending has continued to outperform expectations, and fiscal support is increasing, particularly to address sector-specific tariff pressures. However, weak Q2 GDP and recent labour market data make a September rate cut uncertain.
Scotiabank
Scotiabank expects the Bank of Canada to cut its policy rate by 25 basis points at each of the next two meetings as a precaution against weaker growth and inflation. The bank anticipates these cuts will be reversed in the second half of 2026, reflecting expectations that inflation will prove more persistent than the BoC currently believes. In the U.S., Scotiabank now expects the Federal Reserve to implement 25 basis point cuts at each of the next six meetings.
TD Canada
TD expects Canadian economic growth to remain below trend through 2025 and 2026, before stabilizing in 2027. The slowdown is being driven by weaker population growth and the dampening effects of tariffs on both business investment and consumer confidence. While lower interest rates had offered some support to consumer spending, rising prices are expected to erode purchasing power and weigh on demand—pushing the unemployment rate above its long-run average until 2027.
After a stretch of relatively stable inflation, both headline and core inflation are projected to stay above the Bank of Canada’s 2% target through 2025 due to ongoing tariff pressures. TD anticipates the Bank will lower its policy rate back to the estimated neutral level of 2.25% by 2025. As growth catches up to that of the U.S., the Canadian dollar is expected to recover, moving back into the 74–76 U.S. cent range.
BMO
BMO notes that the Bank of Canada cut its key overnight rate by 25 basis points to 2.50%, marking the first reduction in six months and aligning with expectations. The decision reflected a softer labour market, easing underlying inflation, and the removal of most retaliatory tariffs, which together reduced pressure on core prices. The Bank highlighted ongoing global growth weaknesses and maintained a cautious, shorter-term focus on policy, without signaling an immediate follow-up cut. BMO continues to expect two additional 25-basis-point cuts in the coming months, likely in December and next March, as economic weakness and slowing inflation warrant further easing.
Alex Leduc
Alex Leduc is Founder and CEO at Perch. Prior to starting Perch, he worked in the real estate sector for 8 years in corporate finance, strategy and analytics roles. He is currently a Technical Advisory Committee Member of the Financial Services Regulatory Authority of Ontario (FSRA) and Co-Chair of the Canadian Lenders Association Mortgage Roundtable. Alex is a graduate of Ivey Business School from Western University and a CFA Charterholder. LinkedIn