Canada Interest Rate Forecast 2025-2029
Last Updated: June 4, 2025
CURRENT INTEREST RATE FORECAST FOR 2025: 2.75% (last updated June 4, 2025)
Current Forecasts:
For more information about the 2025 Bank of Canada rate announcement schedule, read more here 👈
Key Takeaways (updated June 2025)
- On Wednesday, June 4, 2025, The Bank of Canada announced that it will be holding its rate, keeping the policy rate at 2.75%.
- Recent data indicates inflation is decelerating toward the Bank of Canada’s target, coupled with slow economic growth.
2025 Predictions (updated June 2025)
Will Interest Rates in Canada Go Down in 2025?
On June 4th, the Bank of Canada cut its interest rate to 2.75%. The next Bank of Canada announcement is scheduled for July 30, 2025.
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 2028 (as of June 2025) | |
|---|---|
| Date | 5-year variable rates |
| 6/30/25 |
4.06% |
| 12/31/25 |
3.94% |
| 6/30/26 |
3.52% |
| 12/31/26 |
3.89% |
| 6/30/27 |
3.90% |
| 12/31/27 |
3.93% |
| 6/30/28 |
4.03% |
| 12/31/28 |
4.08% |
| 6/30/29 |
4.18% |
| 12/31/29 |
4.24% |
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 June 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.
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 growth in Q1 of 2025 slowed to 1.8%, below the Bank of Canada’s expectations relative to the January outlook. 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: Bank of Canada)
- Inflation: Core inflation (year over year) in April was 2.5% (vs 2.2% in March), above the Bank’s 2% inflation target and is trending upward, which would support a hold. (Source: Trading Economics)
- Unemployment: Increased to 6.9% in April (0.7% 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.
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What is the mortgage interest rate forecast for 2025 in Canada?
On June 4th, the Bank of Canada announced a rate hold, keeping the interest rate at 2.75%.
Our current best 5-year fixed rate is 3.89% and 5-year variable rate is 4.10%.
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What are the interest rate predictions from the banks?
CIBC
CIBC Economists anticipate the Bank of Canada will deliver quarter-point rate cuts in both July and September, marking the final moves of this easing cycle. This outlook assumes the U.S. does not escalate trade tensions to the point of triggering a global recession. These cuts are unlikely to cause a prolonged decline in the Canadian dollar, as markets are expected to shift focus toward potential Fed rate cuts by year-end—contributing to a broader weakening of the U.S. dollar after an extended period of strength.
RBC
RBC expects the Bank of Canada to have concluded its rate-cutting cycle, following its decision to hold rates steady in June. The BoC pointed to lingering uncertainty around U.S. trade policy and the early impact of tariffs on the Canadian economy as reasons for pausing. With the overnight rate now sitting comfortably within the neutral range, RBC believes further cuts are unlikely—though the Bank may keep the door open to additional easing if economic softness persists and inflation stays under control.
Scotiabank
Scotiabank expects Canada and the U.S. to avoid recessions, barring a major escalation in tariffs or uncertainty. In Canada, fiscal measures will help support growth in the near term, with the potential for further government stimulus. However, persistent inflation remains a key concern, likely limiting the Bank of Canada and the Federal Reserve’s ability to ease policy in 2025. As a result, Scotiabank anticipates both central banks will hold rates steady through 2025, with rate cuts not expected until 2026.
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 expects the Bank of Canada to resume rate cuts in July, following two holds at 2.75%. While recent inflation data showed some firmness, the Bank is likely to ease if upcoming CPI reports show contained price pressures and growth continues to soften under trade-related uncertainty. BMO forecasts three 25 bp cuts—in July, October, and January—bringing the policy rate to 2.00%, just below the estimated neutral range.
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
