Bank of Canada expected to hold at 2.25% tomorrow, but two big banks now see October hikes

THREAT · Builders & Developers · Mortgage & Rates

The Bank of Canada makes its next policy decision on Wednesday, September 2, and the consensus is a seventh straight hold at 2.25%. Every one of 35 economists surveyed by Reuters expects no change, and bond markets price only a 3% chance of a move. But the tone has shifted: National Bank and Scotiabank now forecast the Bank will raise rates to 2.50% in October and 2.75% by year-end, citing headline CPI at 3.0% — the top of the target band — even as core measures sit near 2%. BMO, CIBC, RBC and TD still expect the hold to run through December (Tech Times, Aug. 31; MoneySense).

The macro backdrop strengthens the hawks’ case. Statistics Canada reported Friday that the economy grew 3.3% annualized in the second quarter, the fastest pace since early 2023 and well above the Bank’s 2.5% forecast, and revised the first quarter from a contraction to modest growth — effectively ending the recession debate. Exports, consumer spending and business investment all rose, and resale housing showed signs of revival (CP24, Aug. 28). Five-year fixed mortgages are currently around 4.09% and five-year variables near 3.35%.

What it means: For Alberta builders and developers, the planning assumption of further rate relief in 2026 should be retired. Buyer qualification is not going to get easier this fall, and the risk has flipped toward tighter conditions in Q4. Sales and marketing plans built around “rates are coming down” messaging need a different hook — rate-hold urgency, builder-paid buydowns, and total-cost-of-ownership framing will carry more weight than waiting for the Bank.