Bank of Canada Building: By Taxiarchos228, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=11974266
OTTAWA—The Bank of Canada has lowered its key interest rate to 2.25 per cent, signalling it is likely finished cutting rates for now as the country contends with economic fallout from the U.S. trade war. The central bank said the move was meant to support an economy weakened by tariffs and global uncertainty while keeping inflation near its two per cent target.
The rate cut marks the second consecutive decrease this year, bringing total reductions to one full percentage point since January. Policymakers described the adjustment as necessary to guide the economy through a period of transition that has left Canadian businesses facing higher costs and reduced exports.
Economic data show the country’s output contracted in the second quarter, with sharp declines in trade-sensitive sectors such as steel, aluminum, autos and lumber. The bank’s Monetary Policy Report projects GDP to remain weak through the rest of 2025 before gradually improving next year as exports and investment recover.
Inflation rose to 2.4 per cent in September, largely driven by gasoline and grocery prices, but is expected to settle near two per cent in early 2026. Analysts say the balance between slowing growth and rising prices leaves little room for further rate cuts without risking higher inflation.
The central bank described the current rate as appropriate to help stabilize the economy through ongoing trade disruptions. Its next interest rate decision is scheduled for Dec. 10.
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