October 29, 2025
RED FM News Desk
The Bank of Canada announced on Wednesday that it is reducing its key interest rate by 25 basis points (0.25%), bringing the target rate down to 2.25%. The rate cut was widely anticipated by financial markets and many economists, who expected the central bank to provide more support to the slowing Canadian economy.
This marks the second consecutive rate cut for the central bank, which previously lowered the rate by a quarter point in September.
The Bank noted ongoing weakness in the economy, attributing much of it to U.S. trade actions and tariffs. The economy is facing a “difficult transition,” and the trade conflict is projected to structurally reduce Canada’s economic capacity and add costs.
Despite the trade-related cost pressures, the Bank expects overall inflation to remain close to its 2% target as the weaker economy restrains price increases.
The central bank released its updated economic forecasts in its Monetary Policy Report (MPR), the first full projection since January.
The Bank projects modest GDP growth through the rest of the year, with an expectation for weak growth in the second half of 2025. It forecasts GDP to grow by 1.2% in 2025 and 1.1% in 2026.
In prepared remarks, Governor Tiff Macklem offered a strong indication that the cutting cycle may be paused for now. He stated that the Governing Council sees the current policy rate as “about the right level” to keep inflation on target while the economy adjusts to the structural damage caused by trade uncertainty.
The central bank emphasized that while it is prepared to respond if the outlook changes significantly, the current rate is appropriate based on their latest projections. The next interest rate announcement is scheduled for December.
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