Global financial markets have been incredibly volatile lately, and it's already impacting Canadian interest rate forecasts. TD, CIBC, and BMO have all updated their predictions, now expecting the Bank of Canada to cut rates faster and deeper over the next 16 months.

What’s the latest? Just a couple of weeks ago, CIBC and TD forecasted a 1.75% rate cut by the end of 2025. Now, they’ve updated that to a 2% cut, bringing the overnight target rate down to 2.50%—a level we haven’t seen since fall 2022.

Why the change? This shift is largely driven by events in Japan and the U.S.:
🇯🇵 In Japan, a change in the Bank of Japan’s negative interest rate policy triggered a sell-off in global financial markets.

🇺🇸 In the U.S., concerns are growing that the Federal Reserve’s high interest rates might push the economy into a recession. Recent weak employment data and disappointing earnings from tech giants have further fueled expectations of rate cuts.

 What does this mean for Canada? Canadian markets often follow U.S. trends, so bond yields in Canada have also plummeted, leading to lower fixed mortgage rates. Plus, insights from the Bank of Canada suggest they’re increasingly worried about downside risks to the economy, which could mean more rate cuts are on the horizon.