09:17 AM EST, 01/08/2025 (MT Newswires) -- The Bank of Canada has shifted its focus from taming inflation by cooling the economy to supporting a gradual reacceleration of activity, noted RBC.

The bank expects the overnight rate to reach 2% by mid-year and provide a major boost to 2025, especially in the second half of the year, driving financing costs lower for investment and cushioning against the mortgage rate renewal shock.

However, lower policy rates in 2025 may not be enough to further materially lower three to five-year Canadian bond rates, off of which mortgages are priced, stated RBC. These rates are already expected to remain relatively steady in 2025.

They have priced in monetary easing in Canada and are being lifted by higher rates in the United States, according to the bank.

The average household debt burden will stabilize in 2025 and improve for some, but many households will still face a payment shock, added RBC.