Monday Market Minute | Dec 01, 2025

BoC December decision preview — will the cutting cycle end at 2.00%?

What Moved

Heading into the BoC's final rate decision of 2025, markets were evenly split on whether a 25bps cut to 2.00% would materialize. The case for cutting rested on persistently below-potential GDP growth and a labour market that had not recovered from the trade disruption. The case for holding argued that at 2.25%, the policy rate was already within the neutral range and further cuts risked reigniting housing speculation without addressing the supply-side constraints that tariffs had imposed on the economy. Bond markets priced the decision as a coin flip.

Why It Matters

For private markets, the December decision was less about the 25bps increment and more about the signal it sent for 2026. A cut to 2.00% would indicate that the BoC saw ongoing weakness requiring stimulus — supportive for credit and real estate but concerning for the broader growth outlook. A hold would signal that the normalization cycle was complete, establishing a stable rate floor for pricing private market returns over the coming 12-18 months. Both outcomes were manageable; the clarity itself was the valuable input.

Signal to Watch

Macklem's guidance on the 2026 rate path and the updated Monetary Policy Report forecasts would be more consequential than the rate decision itself for private market positioning.

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