Canadian Bank interests projection for the 2nd half of 2025

The consensus projection for the Bank of Canada's policy interest rate in the second half of 2025 suggests that rates are more likely to decrease or remain stable rather than increase. Here’s a detailed overview based on available information:

- **Current Policy Rate**: As of June 2025, the Bank of Canada's overnight rate is at 2.75%, which is considered within the "neutral" range (2.25%–3.25%). This follows a series of rate cuts in 2024, with the rate dropping from 5% to 3% by January 2025 and further to 2.75% by March 2025.[](https://www.bankofcanada.ca/2025/03/fad-press-release-2025-03-12/)[](https://www.bankofcanada.ca/2025/04/fad-press-release-2025-04-16/)

 

- **Consensus Forecast for 2025**:
  - **No Immediate Increases Expected**: Most sources indicate that the Bank of Canada is unlikely to raise interest rates in the second half of 2025. Instead, the focus is on maintaining or further reducing rates to support economic growth amidst trade uncertainties and tariff pressures from the U.S.[](https://www.nesto.ca/mortgage-basics/mortgage-rates-forecast-canada/)[](https://ca.finance.yahoo.com/news/bank-of-canada-interest-rate-announcement-close-to-even-odds-for-a-cut-or-pause-amid-tariff-uncertainty-110018528.html)

  - **Projected Rate Cuts**: Several forecasts suggest additional rate cuts in 2025:
    - A Reuters poll and posts on X indicate the Bank of Canada is expected to hold rates at 2.75% for the June 4, 2025, announcement but may cut rates at least twice more in 2025, potentially by 0.25% each time, bringing the rate to around 2.25% by year-end.[](https://x.com/daniel_foch/status/1929591152900006037)[](https://x.com/reutersLjungg/status/1929534538184634371)[](https://x.com/velomarc/status/1929536293366579579)

    - Specific projections include:
      - TD Bank anticipates a total of 0.50% in cuts by the end of 2025.[](https://ca.finance.yahoo.com/news/bank-of-canada-interest-rate-announcement-close-to-even-odds-for-a-cut-or-pause-amid-tariff-uncertainty-110018528.html)

      - BMO and National Bank project 0.75% in total cuts by year-end.[](https://x.com/altruafinancial/status/1929911257068404921)

      - Perch’s forecast suggests an additional 0.75%–1% in cuts for 2025, but with potential hikes in 2026 if inflation rises.[](https://myperch.io/canada-interest-rate-forecast/)

    - The Bank of Canada’s Market Participant Survey (Q1 2025) forecasts two 0.25% cuts in June and July, stabilizing the rate at 2.25% for the remainder of 2025.[](https://www.nesto.ca/mortgage-basics/mortgage-rates-forecast-canada/)

  - **Inflation and Economic Context**: Inflation is expected to remain close to the Bank of Canada’s 2% target in the second half of 2025, with core inflation potentially easing. However, trade tariffs could exert upward pressure on inflation, which might limit further cuts but is not currently expected to prompt rate increases unless inflation significantly exceeds the target.[](https://www.bankofcanada.ca/publications/mpr/)[](https://www.bankofcanada.ca/publications/mpr/mpr-2025-01-29/canadian-outlook/)[](https://myperch.io/canada-interest-rate-forecast/)
  - **Tariff Uncertainty**: The ongoing U.S.-Canada trade tensions and tariffs are creating economic uncertainty, which may lead to weaker growth and a dovish stance from the Bank of Canada, favoring rate cuts over increases to mitigate potential recessionary pressures.[](https://www.bankofcanada.ca/2025/03/fad-press-release-2025-03-12/)[](https://www.bankofcanada.ca/2025/04/fad-press-release-2025-04-16/)[](https://ca.finance.yahoo.com/news/bank-of-canada-interest-rate-announcement-close-to-even-odds-for-a-cut-or-pause-amid-tariff-uncertainty-110018528.html)

- **Longer-Term Outlook**: Some sources suggest that if inflation rises due to tariffs or other factors, the Bank of Canada might consider rate hikes in 2026 or beyond, potentially pushing mortgage rates to the mid-3% range. However, for the second half of 2025, the consensus leans toward maintaining or lowering rates rather than increasing them.[](https://myperch.io/canada-interest-rate-forecast/)[](https://altrua.ca/canada-interest-rate-forecast/)

- **Impact on Commercial Bank Rates**: The prime rate, which influences variable-rate mortgages and loans, is currently around 4.95% (as of early 2025). If MOst commercial banks in Canada, such as TD, Scotia, BMO, and National Bank, set their prime rates based on the Bank of Canada's overnight rate plus a spread (typically 2–2.2%). If the policy rate remains at 2.75% or drops to 2.25%, the prime rate is expected to stay around 4.7%–4.95% or slightly lower by the end of 2025. Fixed mortgage rates, which are influenced by bond yields, are projected to decline slightly, with five-year fixed rates possibly dropping to around 4% by year-end.[](https://wowa.ca/interest-rate-forecast)[](https://www.mortgagesandbox.com/mortgage-interest-rate-forecast)

**Conclusion**: The consensus projection for the second half of 2025 does not anticipate an increase in the Bank of Canada’s policy interest rate. Instead, the expectation is for the rate to either hold steady at 2.75% or decrease by 0.50%–1% (to around 2.25%–2%) due to economic slowdown risks and tariff-related uncertainties. Consequently, commercial bank prime rates are likely to remain stable or decrease slightly, with variable mortgage rates potentially dropping to around 4% and fixed rates possibly reaching 4% by year-end.[](https://wowa.ca/interest-rate-forecast)[](https://www.mortgagesandbox.com/mortgage-interest-rate-forecast)[](https://x.com/daniel_foch/status/1929591152900006037)

*Note*: Economic forecasts are subject to change based on new data, particularly regarding U.S. trade policies and inflation trends. For the latest updates, you may want to check the Bank of Canada’s announcements or follow economic reports on platforms like X.[](https://myperch.io/bank-of-canada-interest-rate-schedule/)