After three consecutive rate holds as the trade uncertainty with the United States continues, the Bank of Canada announced a rate drop for the first time since March. Today's rate decrease from Canada's central bank brings their policy rate to 2.50%.
Governor of the Bank of Canada Tiff Macklem, said the decision was based on three main considerations. "Through the recent period of trade upheaval, Governing Council has been proceeding carefully, paying particular attention to the risks and uncertainties facing the Canadian economy. Three developments have shifted the balance of risks since our July decision. First, Canada’s labour market has softened further. Second, although there are still some mixed signals, on balance, recent data suggest the upward pressures on underlying inflation have diminished. Third, with the removal of most retaliatory tariffs by Canada, there is less upside risk to future inflation. Considerable uncertainty remains. But with a weaker economy and less upside risk to inflation, Governing Council judged that a reduction in the policy rate was appropriate to better balance the risks going forward." (Bank of Canada, 2025)
Macklem also discussed the on going trade issues. "The federal government’s recent decision to remove most retaliatory tariffs on imported goods from the United States will mean less upward pressure on the prices of these goods going forward. Still, the disruptive effects of shifts in trade will add costs even as they weigh on economic activity. It is difficult to predict the extent of cost increases, where they will show up, and how they could be passed through to consumer prices. With some stability in US tariffs in recent weeks, near-term uncertainty may have come down a little. But the focus is shifting to the upcoming review of the Canada-United States-Mexico Agreement. New US threats to use tariffs as an instrument of geopolitical pressure are also contributing to global uncertainty." (Bank of Canada, 2025)
The Bank of Canada's next rate announcement is scheduled for Wednesday, October 29, 2025.
Graph Courtesy: Bank of Canada; https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/
Quotes Courtesy: Bank of Canada; https://www.bankofcanada.ca/2025/09/opening-statement-2025-09-17/
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