04:28 PM EDT, 09/17/2025 (MT Newswires) -- The Toronto Stock Exchange recovered more than 120 points over the last hour of trading Wednesday and closed modestly higher, buoyed by the prospect of at least one other interest rate cut coming from the Bank of Canada before the end of 2025

Wednesday's gains on the resources-heavy S&P/TSX Composite Index came despite lower commodity prices, mixed sectors and even as RBC said the Bank of Canada Governing Council members were "cautious cutters" today in reducing the overnight target by 25 basis points to 2.5%, a first cut since March.

At the final bell, the Composite Index was up just 6.43 points to 29,321.66, but it had been down near the 29,200 level near 3pm Eastern time and looked set to post back to back losses for the first time since August 19 and 20. Since then the TSX has posted a succession of record closes, the most recent at 29,431.02 on Monday.

Of commodities, gold had moved down from a record high later afternoon Wednesday ahead of the Federal Reserve's own interest rate cut, the first from it this year. Gold for December delivery was down $30.70 to US$3,644.40 per ounce, falling off Tuesday's record high.

Also, West Texas Intermediate closed lower following three days of gains, sticking within the tight range it has mostly remained within for more than a month, even as a report showed a much larger than expected drop in U.S. oil inventories and the Fed cut. WTI crude oil for October delivery closed down $0.47 to settle at US$64.05 per barrel, while November Brent crude was last seen down $0.56 to US$67.91.

On Canadian interest rates, National Bank noted that last month, just 7 basis points of easing was priced for the September decision, but the near-term rate outlook changed quickly after a weak Labour Force Survey and GDP report. National Bank said with yesterday's CPI report ushering in some encouraging inflation developments, the decision to ease today was an obvious one. The rate statement reflects this shift as policymakers cite a weaker economy and a shifting balance of risks in justifying the decision to ease. Moreover, Bank Governor Tiff Macklem said the cut was supported by a "clear consensus", National Bank added.

National Bank noted conventional wisdom says that if you're going to cut once, you're probably going to go again, asking: does a single 25 bp move the needle in significant fashion?. It noted the empirical record supports this view as the only time the BoC has held, then cut, then held was the mini 2015 easing cycle when the policy rate was at or below 1%. National Bank said the BoC is trying to temper easing expectations as they removed the line from the July release that said, "there may be a need for a [rate] reduction". Still, National Bank added,it expects a follow-on cut in October.

National Bank said: "And while our base case outlook entails a 2.25% terminal rate (i.e., just one more cut), risks have clearly swung towards more easing being delivered. Finger in the air, we'd assign a 40% probability to the terminal rate settling at 2% (or lower). Incoming economic/inflation data, an October Business Outlook Survey, Canada-US trade developments and a fall budget will all help guide that view."

As far as the BoC's other policy levers are concerned, National Bank was not surprised to see the deposit rate left unchanged relative to the overnight target despite CORRA setting well above target all month. It recalled that earlier CORRA pressures persisted for months before a deposit rate cut was deemed necessary. This month, National noted, the BoC has not really tried to address higher repo rates with their usual tool (overnight repo operations) so there didn't seem to be enough concern to warrant an adjustment. Meanwhile, it also noted, the BoC did not announce it would be restarting treasury bill purchases, though National still anticipates that decision will come relatively soon in line with guidance from Deputy Governor Toni Gravelle.

Just before the close of trade, BMO Capital Markets published a note saying it also suspects rates won't stay here, with the BoC likely to cut further in the months ahead. BMO's official call is two more cuts to 2.0%.

According to BMO, it's not clear that the neutral range is stable. BMO suspects that the BoC could clip that range next year by 25 basis points, in part due to milder potential GDP on much slower population growth.

But elsewhere, RBC published a note entitled 'BoC - Cautious Cutters' noting there was no direct forward guidance, but that the BoC "owned" the cut, emphasizing there was a clear consensus for the move and that it was consistent with "a weaker economy and less upside risk to inflation". Importantly, RBC said, the BoC's current assessment of underlying inflation, at 2.5%, was unchanged from July so they said they will "proceed cautiously" and remain data dependent. The door is open to an October cut, RBC added, noting they probably need to see stronger growth/labor markets to not move again in this cycle, while the timing of the Federal Budget, after the October BoC meeting, provides additional scope. "However, they are cautious cutters and any easing should be viewed through the lens of adjustment style moves."