Financial market participants believe that
will keep interest rates at the current level of 2.25% and then raise them to 2.50% in the third quarter of 2027.
However, 63.3% stated that “at-risk groups have been skewed toward a lower path.”
These are some of the findings from the Bank of Canada's quarterly survey of 30 financial market participants, which includes dealers and banks, asset and pension fund managers, insurers and researchers, conducted from September 9 to October 1.
In a previous survey released in August, respondents said they expected the Bank of Canada to cut rates to 2.25% and then hold them until 2026.
The Central Bank has reduced
to 2.25 percent on Oct. 29, and said rates are at the right level to support the economy without stimulating inflation.
Bank of Canada Governor Tiff Macklem also said monetary policy can only do so much of the economic heavy lifting given the structural changes caused by the trade war with the United States.
Last week, Prime Minister Mark Carney's government
The document identifies spending that will push the federal deficit to $78.3 billion in the 2025-26 fiscal year as Ottawa looks for ways to protect Canada's economy from tariffs.
The central bank's third-quarter survey was conducted before trade talks between the U.S. and Canada broke down after U.S. President Donald Trump took umbrage at
is administered by the Government of Ontario.
Market participants were also asked about the possibility of a recession and their forecasts for gross domestic product (GDP), inflation, the Canadian dollar and oil prices.
The average expectations of survey respondents place the likelihood of a recession in Canada over the next six months at 35 per cent, which is the same as the second-quarter survey level, but significantly higher than the 20 per cent chance reported in the third quarter of 2024.
The survey found some deterioration in economic prospects.
For example, the 25th percentile of responses placed the probability of a recession at 20 percent, compared with 10 percent for the same period last year. Meanwhile, the 75th percentile placed the probability of a recession at 35 percent, the same as a year ago.
A recession is defined as a decline in economic growth for two consecutive quarters.
Meanwhile, GDP is projected to average 0.6% annualized in 2025, rising to 1.7% by the end of next year.
Respondents also cited upside and downside risks to their forecasts. The first includes easing trade tensions, larger-than-expected fiscal stimulus and a rate cut by the Bank of Canada. The latter includes rising trade tensions, lower consumer spending and weaker economic growth.
On
Survey respondents expect this figure to reach two percent by the end of 2025. The latest CPI report pegged headline inflation at 2.4 percent.
For the Canadian dollar, the median participant said the Canadian dollar would be worth 73 US cents by the end of 2025, up from 74 US cents at the end of last year.
is currently trading at around 71 US cents, down from the low of 70 US cents it hit earlier this year.
However, the Canadian dollar has recently fallen just over three percent from this year's high of 73.7 US cents as the rising US dollar and higher US interest rates take their toll.
Participants expect the Canadian dollar to rise in 2026 and end the year at 75 US cents.
The study also said the average market expects West Texas Intermediate (WTI), the US benchmark, to close the year at US$62 per barrel.
WTI traded near the US$60 level, falling as market watchers predicted a significant glut of oil would exceed demand.
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