Monday Market Minute | Jun 02, 2025

BoC expected to resume cuts as growth stalls and inflation stays tame

What Moved

Heading into the June BoC decision, market consensus firmed around another 25bps cut. The case was straightforward: GDP growth had decelerated to annualized 0.8% in Q1, well below potential. Core inflation remained within the 1-3% target band despite tariff-related price pressures on imported goods. The labour market continued to soften, with the unemployment rate ticking up to 6.9%. Bond markets had already priced the cut with high confidence, driving the 2-year GoC yield to 2.5%.

Why It Matters

A rate resumption would validate the positioning of private credit managers who had maintained floating-rate exposure through the spring pause. For real estate, the psychological signal mattered as much as the basis points — a resumption of the cutting cycle would revive buyer confidence that had wavered during the April hold. PE sponsors with pending acquisitions had structured their financing contingent on further easing. The cut, if delivered, would unlock several transactions that had been in conditional status since March.

Signal to Watch

The magnitude of the cut — 25bps or a larger 50bps move — would signal whether the BoC viewed the economic weakness as manageable or requiring aggressive intervention.

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