What Moved
The Bank of Canada cut its overnight rate 25 basis points to 2.25% on October 29, approaching a rate plateau as it moved below the estimated neutral range and signaled that the easing cycle was nearing its conclusion. The decision was data-driven — the economy was performing well, and the Bank was fine-tuning its policy to what it viewed as the appropriate setting for current conditions (BoC, Oct 29, 2025).
Markets began pricing an extended pause at 2.25%, with expectations that the December decision would hold rates steady. The cumulative easing since June 2024 now totalled 250 basis points — from 4.75% to 2.25% — one of the most significant easing cycles in recent Canadian monetary history.
Canadian housing continued to perform in its sustainable range. Fall activity was healthy, prices were stable to modestly positive, and the market showed no signs of the speculative excess that had characterized the 2020-2021 period. The correction was now well in the past, and the market reflected genuine supply-demand fundamentals (CREA, Oct 2025).
Private credit metrics remained strong. MIC yields were healthy relative to traditional fixed income, origination was balanced, and portfolio performance continued to benefit from the rate normalization. The sector was operating with a level of consistency that had been absent during the stress years.
What It Means
The move to 2.25% was a milestone — the overnight rate was now at its lowest level since the initial COVID emergency cuts of 2020. But the context was entirely different. In 2020, rates were cut in panic. In 2025, rates arrived at 2.25% through a methodical, 16-month easing cycle driven by economic balance and inflation control.
For private market investors, the rate level created a constructive environment across asset classes. Private credit spreads above 2.25% base rates delivered meaningful yield premiums. PE deal structures built on realistic financing assumptions were well-positioned. Private real estate operated against a stable rate backdrop that supported both collateral values and transaction activity.
The 250 basis points of cumulative easing since June 2024 had transformed the operating environment for Canadian alternatives. Borrowers who faced 5.00% base rates in mid-2023 were now at 2.25% — a 275 basis point reduction that translated directly into improved loan performance, lower default probability, and healthier cash flows across the private credit sector.
The approaching end of the easing cycle was itself a positive signal. Rate stability — rather than continued cuts — was what private markets needed most. Predictable rates allowed for realistic underwriting, confident deal structuring, and rational pricing across all alternative asset classes. The stability also enabled more meaningful comparisons between private market returns and public market benchmarks, giving allocators a clearer basis for portfolio construction decisions heading into 2026.
What We're Watching
The December BoC decision — markets expected a hold at 2.25%, which would mark the beginning of an extended pause.
The Fortress trial verdict, expected imminently, which would close one of the last major chapters of the 2019-2025 regulatory cycle.
Year-end private market activity and early 2026 outlook data from managers and industry sources.
Closing
October's cut to 2.25% brought the easing cycle near its end. For those invested in Canadian alternative investments, the destination was worth the journey — a normalized rate environment, healthy market conditions, and a private markets sector operating with discipline and clarity.
For the full quarterly analysis, see Q4 2025: Seven Years of Lessons.
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