Central bank commentary weighs on risk assets, following BoC and Fed rate cuts

TORONTO – Canada’s main stock index closed more than 270 points lower on broad-based losses, while U.S. stock markets posted mixed results as investors reacted to rate cuts on both sides of the border.

Hadiza Djataou, a vice-president and portfolio manager of global bonds at Mackenzie Investments, said risk assets gave back some gains on Wednesday after interest-rate cuts in Canada and the U.S. 

The Bank of Canada cut its benchmark interest rate by a quarter point on Wednesday and signalled it may be satisfied with where the policy rate sits amid ongoing U.S. trade uncertainty.

The central bank’s key rate now stands at 2.25 per cent after a second consecutive cut. Along with the reduction in borrowing costs, the Bank of Canada also signalled it may be done easing interest rates. 

“Typically, when a central bank points to the end of an easing cycle, it typically hints to the market that there’s less equity in the system and it’s less supportive for risk assets,” Djataou said. 

The U.S. Federal Reserve also cut its key interest rate Wednesday for a second time this year as it seeks to shore up economic growth and hiring even as inflation stays elevated. That brings the Fed’s key rate down to about 3.9 per cent, from about 4.1 per cent. 

Djataou said markets were swayed by Fed Chair Jerome Powell’s comments that a rate cut in December is not a foregone conclusion. 

“That poured some cold water on the dovishness that the market is expecting from the Fed, and that is also weighing on risk assets,” Djataou said. 

Speaking to reporters after the Fed announced its rate decision, Powell said there were “strongly differing views about how to proceed in December.”

The warning hit Wall Street because many traders considered a cut in December as a near certainty, along with potentially more in 2026, and they had already driven stock prices to records in part because of it.

The U.S. central bank is also navigating without the economic signposts it typically relies on, including monthly reports on jobs, inflation and consumer spending, which have been suspended because of the U.S. government shutdown.  

“It’s highly likely that we won’t see a proper inflation print maybe until January, which is going to be released in February,” Djataou said.

Despite the lack of government data, she said the Fed has ways to look at real-time inflation figures and can rely on data from payroll company ADP to assess the job market. 

The S&P/TSX composite index was down 274.90 points at 30,144.78.

In New York, the Dow Jones industrial average was down 74.37 points at 47,632. The S&P 500 index was down 0.30 points at 6,890.59, while the Nasdaq composite was up 130.98 points at 23,958.47.

The Canadian dollar traded for 71.86 cents US compared with 71.64 cents US on Tuesday.  

The December crude oil contract was up 33 cents US at US$60.48 per barrel, while the December gold contract was up US$17.60 at US$4,000.70 an ounce.

Djataou noted that gold recently reached an all-time high, topping out around US$4,300 an ounce, driven by factors like geopolitical risks and accumulation by central banks. More recently, she said there has been a pullback, down about eight per cent from the highs in late October. 

“It’s very vulnerable and I think there is really a case to be made not necessarily to go invest in gold at this point in time,” she said. 

This report by The Canadian Press was first published Oct. 29, 2025.

— With files from The Associated Press.

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