On The Radar: What Is Next For U.S. And Canada Overnight Rates?

Capital Markets update
Oct 30, 2025

First National Financial LP

Three Takeaways

Post-decision comments were cautious, with Tiff Macklem calling Canada’s rate about right amid structural trade pressures, and Jerome Powell saying another U.S. rate cut in December is far from certain given a divided committee and limited economic data.
Both central banks focused on inflation and employment in their remarks. Still, they made no mention of AI-related layoffs, even as major companies such as Amazon, UPS, Microsoft, and Accenture cut tens of thousands of white-collar jobs due to automation.
Futures markets remain more bullish than policymakers, with traders pricing a 68 percent chance of another U.S. cut and a 22 percent chance of a Canadian cut in December.

Since the 5.00 percent peak in July 2023, the Bank of Canada has lowered the overnight rate nine times by a total of 275 basis points, reaching 2.25 percent on Wednesday. In the United States, after the 5.25 to 5.50 percent peak in 2023, the Federal Reserve has cut rates five times, totaling 150 basis points, and moved the target range to 3.75 to 4.00 percent on Wednesday this week.

Five and ten year government bond yields rose after the decisions in both countries. The U.S. 10 year was up as much as 10 bps and Canada’s 10 year higher as well, showing that a policy cuts does not automatically pull longer term yields down.

Looking ahead, what can we determine about future rate cuts in both countries, given their influence on the Canadian mortgage rate market?

Clues From The Speeches

In Canada, Governor Tiff Macklem said the current policy rate is about right to keep inflation near target while helping the economy adjust to deep trade disruptions. He described the downturn as structural rather than cyclical, driven by U.S. tariffs that have reshaped Canada’s export base and reduced productivity. Macklem noted that further rate reductions would do little to address these sector-specific shocks, stressing that fiscal measures will now need to carry a greater share of the load. His tone suggested that the central bank’s focus has shifted from stimulating growth to managing a difficult economic transition.

In the United States, Federal Reserve Chair Jerome Powell pushed back against market expectations for another rate cut in December, saying that view was “far from” certain. He pointed to a divided policy committee and limited data during the government shutdown, which has made it harder to assess the economy’s direction. Powell emphasized that the recent easing was intended to prevent a hiring slowdown from worsening, not to start a new round of stimulus. His remarks signaled a cautious stance as the Fed weighs slowing job growth against inflation risks tied to tariffs and strong consumer spending.

The Unique Challenges For U.S. Rate Predictions

Forecasting the U.S. path is hard because the Federal Reserve is split, with a 10-2 vote that included one dissent for no change and another for a half-point cut. Kansas City Fed President Jeffrey Schmid opposed any move, while Governor Stephen Miran argued for a 50-basis-point cut, showing sharp differences over the right pace of easing.

Chair Powell also flagged a data blackout from the government shutdown, which limits fresh readings on jobs and prices. With fewer indicators, policymakers cannot test their assumptions, so uncertainty bands around the outlook widen. Markets read the press conference as a warning against assuming another cut, as short-term yields jumped on the day.

All of this makes near-term predictions less reliable, since officials are weighing slower hiring against sticky inflation without the usual flow of data. The missing data includes key releases such as nonfarm payrolls, consumer inflation, retail sales, and industrial production, leaving the Fed to rely on partial private surveys instead of comprehensive government reports.

The Unusual Challenge Of Ai Driven Layoffs And Why No Mention?

Both central banks are focused on two anchors at once: inflation and the job market. Their statements concentrated on price stability and employment trends, with no formal references to AI-related layoffs. It is notable given mounting reports of white collar reductions linked to automation and software, which can cool wage growth and dampen demand. That omission makes the labor narrative feel incomplete even as officials balance inflation control with the need to avoid unnecessary job losses.

In the United States, the policy discussion sits alongside large corporate cuts that many firms partly tie to AI adoption and efficiency drives. Recent headlines include Amazon planning about 14,000 corporate job reductions, UPS trimming roughly 48,000 jobs this year across operations and management, Target cutting 1,000 corporate roles, and broad white-collar reductions at Nestlé, Accenture, Microsoft, Meta, and Salesforce. These moves concentrate in office and support functions while demand remains firm for trades and frontline roles, a mix that can flatten wage pressures in higher-paying segments. If those effects persist, they work in the same direction as lower rates.

Canada shows fewer, more sector-specific reductions, but the signal remains. The list includes 8,347 at Hudson’s Bay Company tied to store closures, about 1,700 at Amazon in Quebec through warehouse exits, around 2,000 at TD Bank, and 1,200 at Bell Canada through voluntary separation as legacy networks wind down. The scale is smaller than in the United States, which aligns with a less severe narrative so far, yet the mix still leans toward corporate and administrative roles that are exposed to automation. Those pressures would tend to ease wage growth at the margin, supporting the rate path if broader inflation continues to cool, even though the Bank of Canada did not point to AI layoffs directly.

Are The Future Markets More Bullish For Rate Cuts Than Central Bank Leaders Suggest?

Futures markets seem more confident about additional easing than policymakers' tone suggests. The CME Group’s FedWatch tool shows traders assigning a 68 percent chance of another U.S. rate cut at the December 10, 2025, meeting, despite Chair Jerome Powell’s clear warning that further cuts are “far from certain.” This disconnect could reflect market expectations that the surge in white-collar job losses, many tied to AI adoption and automation, will weigh more heavily on employment and spending than the Fed’s public remarks acknowledged. Investors may be pricing in the risk that labor weakness, rather than inflation, becomes the dominant concern by year-end.

In Canada, futures imply a 78 percent probability that the Bank of Canada will hold steady at its own decision earlier that same day, meaning 22 percent of traders are still betting on another cut. That minority view is more uncertain than Governor Tiff Macklem’s message that policy is now “about the right level.” Markets may be factoring in the possibility that AI-related restructuring and slower corporate hiring spread north, softening wage pressures and growth more than the bank’s statement anticipated.

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