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Canadian Interest Rates in 2025: What the Banks Are Saying

As we look ahead to 2025, the question on many Canadians’ minds is: “What’s going to happen with interest rates?” After a period of historically low rates followed by rapid increases, it seems we might be heading towards a more stable environment. But what exactly are the experts predicting? Let’s dive into what Canada’s major banks are forecasting for interest rates in 2025.

The Consensus: Further Cuts on the Horizon

The good news for borrowers is that most major Canadian banks agree that we’re likely to see further interest rate cuts in 2025. However, the pace and extent of these cuts vary depending on which institution you ask.

TD Economics: Gradual Descent
TD is taking a measured approach, predicting that the Bank of Canada (BoC) will gradually lower its policy rate to 2.25% by the end of 2025. This forecast suggests a slow but steady decline over the year.

RBC: Below Neutral
RBC forecasts the policy rate to reach 2.00% by Q4 2025

Scotiabank: Early Cut, Then Hold
Scotiabank has a more conservative outlook, forecasting a 25 basis point cut in Q1 2025 to bring the rate to 3.0%. They then expect this rate to hold steady until the end of 2026.

CIBC: The Bold Prediction
CIBC stands out with the most aggressive forecast, predicting the policy rate will drop to 2.25% by Q2 2025 and remain there through Q4. This would represent a significant easing of monetary policy.

National Bank: Middle of the Road
National Bank expects the Bank of Canada to decrease the overnight lending rate to 2.00% by the end of 2025

What Does This Mean for You?

While these forecasts provide valuable insights, it’s important to remember that they’re just predictions. Economic conditions can change rapidly, and the Bank of Canada will make its decisions based on the latest data available.

That said, the consensus among major banks that rates will continue to fall in 2025 is encouraging news for borrowers. If you’re considering a major purchase like a home, or if you’re looking to refinance, these forecasts suggest that borrowing costs could become more favorable in the coming year.

For savers and investors, the potential for lower rates might mean it’s time to reassess your strategy. Lower interest rates typically mean lower returns on savings accounts and fixed-income investments.

The Bottom Line

While the exact path of interest rates remains uncertain, the overall trend seems to be pointing downward for 2025. As always, it’s crucial to stay informed and consider how these potential changes might affect your financial decisions. Whether you’re a borrower, saver, or investor, understanding these forecasts can help you plan for the future and make more informed financial choices.

Remember, your individual financial situation is unique, and it’s always a good idea to consult with a financial advisor before making any major decisions based on interest rate forecasts.

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