The Bank of Canada (BoC) has lowered its key interest rate by another 25 basis points to 2.25%, marking its second consecutive rate cut as the central bank navigates growing economic headwinds.
The decision, widely anticipated by economists, comes as Canada faces increasing fallout from U.S. tariffs and sluggish domestic momentum, despite recent signs of resilience in employment and inflation. The BoC acknowledged that the effects of U.S. trade actions are becoming “more evident,” describing the trade conflict as one that is “fundamentally reshaping Canada’s economy.”
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In its policy statement, the BoC said the current rate level is appropriate to maintain inflation close to its 2% target while supporting the economy through a “period of structural adjustment.” Policymakers emphasized that future decisions will depend on incoming data and whether inflation and growth align with forecasts.
The rate cut follows last month’s 25-basis-point reduction—the first since March—as the central bank seeks to counterbalance weakness in business investment and exports. This move came even after headline inflation rose 0.5 percentage points in September, and the economy posted a surprise gain of 60,400 jobs during the same month.
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The BoC’s Monetary Policy Report also returned to a single base-case forecast, projecting inflation to remain stable near 2% and GDP growth to gradually improve through the rest of 2025, averaging 1.4%. However, the report warned that U.S. tariffs are expected to permanently lower Canada’s GDP level compared with earlier projections.
Overall, the Bank’s latest move reflects its cautious approach—balancing modest inflation pressures against persistent trade uncertainty and a slowing global economy—as it works to keep Canada’s recovery on track.
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