Stagflation and the Bank of Canada’s Inevitable Rate Cut
September 8, 2025

Explore how Canada's job slump and U.S. data influence Calgary's housing market. Lower rates ahead—are you ready to seize this opportunity?
Economy and job loss lead to inevitable Bank of Canada rate cut

Canada’s latest job numbers were announced on Friday and they weren’t pretty. With 65,500 jobs lost and unemployment climbing to 7.1%, the labour market is clearly under strain. Homebuyers in Calgary need to pay attention because these numbers directly influence mortgage rates and housing affordability.

On top of that, Canadian’s are also keeping their eyes on the situation south of the border. American job numbers and inflation data—set to be released on September 11—will play a big role in shaping interest rates here in Canada. What happens to our neighbours has a direct impact on the Bank of Canada and ultimately on the rates you’ll see when applying for a mortgage.

Why U.S. Data Matters in Canada

The Bank of Canada’s interest rate decisions are closely tied to U.S. economic trends. Bond yields and lending conditions in Canada respond to American job and inflation numbers. Right now, the U.S. Federal Reserve is juggling two problems at once: weaker job growth and stubbornly high inflation.

For the first time in over four years, there are fewer job openings in the U.S. than unemployed people. On top of that, inflation is expected to tick up to 2.9%, while core inflation is already at 3.1%. This mix of weak jobs and rising prices—often called stagflation—puts the Fed in a tough spot. And when the Fed is pressured, Canadian policymakers take notice.

Canada’s Employment Report Adds More Pressure

Back home, Canada’s labour market has also softened. Employment fell sharply in August, and economists now expect the Bank of Canada to respond with a rate cut at its September 17 meeting. Some of the country’s biggest lenders, including Scotiabank and BMO, are predicting a quarter-point cut, bringing the policy rate down to 2.5%.

Lower rates could provide some relief for homeowners in Calgary. A cut means slightly lower borrowing costs, which may make mortgage payments a little more manageable. However, the bigger picture still matters—if inflation stays put, the Bank of Canada may not cut as aggressively we hope.

What This Means for Calgary Buyers

For Calgarians homebuyers, the message is clear: mortgage rates are likely to fall, but the path ahead could still be bumpy. The recent weakness in the labour market may give the Bank of Canada reason to lower rates, yet inflation remains the deciding factor.

If you’re on the fence about buying, this could be a window of opportunity. Lower borrowing costs may improve affordability, but it’s also important to consider the stability of your income, the possibility of further rate moves later this year, and the long-term outlook for Calgary’s housing market.

How a Mortgage Broker Can Help

Navigating these uncertain times can be overwhelming, especially if you’re a first-time buyer. A mortgage broker like me can help you:

  • Understand how economic news affects your mortgage options

  • Compare rates across multiple lenders

  • Find a mortgage product that fits your budget and long-term goals

With expert guidance, you’ll be better positioned to take advantage of lower rates while protecting yourself against future changes.

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