66,000 jobs lost, housing on edge — Canadians brace for Bank of Canada’s make-or-break rate call on September 17

Not only did the weak labour market report underscore the fragility of the current labour market, but it also prompted a readjustment on what to expect around the BoC's monetary policy. At this point, economists believe the rising slack in the overall job market offers the Bank of Canada more incentive to restart rate cuts — with the overall aim of stimulating the economy through consumer demand and prompting business investment that includes additional hiring sprees.

As Andrew Grantham, a CIBC economist, pointed out in a recent FP Posthaste article, the more than 100,000 job losses in August and July weren’t confined to tariff-sensitive sectors, such as manufacturing and transportation. Notably, job losses were reported in professional services and among education facilities, which further supports the assertion that Canada's economy continues to weaken. In other words, recent jobs data isn’t just a snapshot of employment but a key signal that the Bank of Canada may use to assess how much the economy can withstand before growth stalls.

As RBC Economist, Claire Fan, explained: Job deterioration combined with softer inflation certainly raises the odds of more aggressive overnight rate cuts.

Markets still betting on a rate cut from the BoC on September 17, 2025

The sharp slowdown in Canada’s labour market appears to have tipped the scales toward economic easing, with most economists now predicting a rate cut between 0.25% and 0.50% during the BoC September 17 rate announcement.

While Bank of Canada Governor, Tiff Macklem, continues to stress that the BoC will not abandon its 2% inflation target, he has also acknowledged the connection and interaction between monetary policy, housing affordability and inflation.

As a result, the current prediction is the BoC will drop its overnight rate from the current 2.75% by 25 basis points to 2.5%.

Economists expect more than one move

According to a recent Reuters poll, conducted between August 29 and September 3, most experts believe a September rate cut won't be the last of the BoC's monetary easing in 2025. According to Reuters, two-thirds of economists anticipate the BoC will only begin cutting rates in September before dropping the overnight rates only slightly in 2026. In part, these anticipated rate drops reflect current market conditions and the fact the central bank has held steady at 2.75% since March 2025.

As a result, some economists, including analysts from TD Economics and CIBC, predict the BoC will follow a September rate cut with another rate reduction later this year — leaving the BoC's target rate closer to 2.25% by December 2025.

Don't bank on a rate cut

Not all economists are confident the BoC will drop rates in September. According to the Reuters poll, economists at Scotiabank predict the BoC will hold the target rate at 2.75% for the rest of 2025, arguing that inflation pressures are still significant and could prompt the Bank to take a more cautionary approach to economic stimulus.

What home buyers and homeowners need to know

After speaking in Mexico City, there can be little doubt that Macklem and his team of analysts consider housing an integral part of the economic lens. In his speech, Macklem emphasized how monetary policy, alone, could not increase the supply of homes but monetary policy did have “a direct effect on the demand for housing.”

For home buyers this observation can be a double-edged sword. On one hand, the decision-makers that can influence the cost of your monthly mortgage are aware that lowering rates will help with housing affordability; however, these same decision-makers are also keenly aware that lower rates also drives up the demand for housing (and can reignite price appreciation, particularly in less affordable cities like Toronto and Vancouver).

It's a not-so-subtle reminder that a rate cut might deliver momentary relief for home buyers, but, ultimately, these cheaper borrowing costs could stoke competition and worsen affordability in markets already constrained by supply.

What it means for Canadians

If the Bank of Canada cuts its overnight rate next week, Canadians could see lower borrowing costs on variable-rate mortgages, lines of credit and some personal loans. Fixed-rate mortgage borrowers may also benefit, as bond yields have been drifting lower in anticipation of easier monetary policy.

For those poised to close on a property or homeowners struggling to sell in a slowing real estate market, a rate cut could be welcome news — even if the help is short-lived.

Sources

1. FP Posthaste: Is a Bank of Canada rate cut in the bag given the cratering job market? (September 8, 2025)