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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

By Josh Tagg, mortgage broker · Mortgages for Less with INDI Mortgage · Calgary, serving all of Alberta ·

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.

Quick answer: Canada lost 65,500 jobs in August 2025 and unemployment rose to 7.1%. In the U.S., weaker hiring alongside inflation expected at 2.9% (core already 3.1%) raised the risk of stagflation. Scotiabank and BMO expected the Bank of Canada to cut a quarter point to 2.5% on September 17. For Calgary buyers that pointed to lower rates, with inflation still the deciding factor.
65,500
Canadian jobs lost, August
7.1%
Canadian unemployment
3.1%
U.S. core inflation
2.5%
Expected policy rate after Sept 17

Why does U.S. economic data matter in Canada?

A woman holds up a phone showing a news article while a man, hand on his chin, sits behind a laptop with a falling line chart.
Canadian bond yields react to U.S. jobs and inflation reports, and fixed mortgage rates follow those yields.

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.

How does Canada’s employment report add pressure for a cut?

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 does this mean 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 can a mortgage broker 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.

How a Calgary mortgage broker helps when the economy is wobbling

Job losses and inflation data move rates before the Bank of Canada does. A broker keeps you ahead of it:

  • Show what a lower rate does to your payment and how much you can qualify for.
  • Lock a rate hold on a pre-approval, so a bumpy path doesn’t cost you.
  • Compare fixed and variable options across multiple lenders, not just your bank.
  • Look at your income stability the way a lender will, before you buy.

Thinking about buying in Calgary?

See what falling rates could mean for your budget.

Apply Online → Book a Discovery Call → Serving Calgary, Edmonton & all of Alberta · Mortgages for Less with INDI Mortgage

Questions about stagflation and the September 2025 rate cut

How many jobs did Canada lose in August 2025?
Canada lost 65,500 jobs in August 2025, and the unemployment rate climbed to 7.1%.
What is stagflation?
Stagflation is a mix of weak job growth and rising prices. In the U.S., there were fewer job openings than unemployed people for the first time in over four years, while inflation was expected to tick up to 2.9% and core inflation was already at 3.1%.
Why do U.S. jobs and inflation numbers affect Canadian mortgage rates?
The Bank of Canada’s rate decisions are closely tied to U.S. economic trends, and Canadian bond yields and lending conditions respond to American job and inflation numbers.
What rate cut did lenders expect on September 17, 2025?
Scotiabank and BMO were predicting a quarter-point cut, bringing the Bank of Canada’s policy rate down to 2.5%.
Should Calgary buyers expect lower mortgage rates?
Mortgage rates were likely to fall, but the path could be bumpy. If inflation stays put, the Bank of Canada may not cut as aggressively as hoped, so buyers should also weigh their income stability and the chance of further rate moves.
How can a mortgage broker help in uncertain times?
A broker can help you understand how economic news affects your mortgage options, compare rates across multiple lenders, and find a mortgage product that fits your budget and long-term goals.

This article was written on September 8, 2025, before the Bank of Canada’s September 17 decision. Rates, forecasts and economic figures quoted are from that time and have since changed. It is general information for Alberta home buyers, not financial, mortgage, tax or legal advice. Rates, products and qualification rules vary by lender. Please speak with a licensed mortgage professional about your specific circumstances. Mortgages for Less with INDI Mortgage.

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