Bank of Canada lowers interest rate to 2.5% in first cut since March

September 17, 2025

RED FM News Desk

The Bank of Canada lowered its key interest rate by 25 basis points to 2.5% on Wednesday, marking its first cut since March.

The cut was widely anticipated by private-sector economists, especially after Statistics Canada reported yesterday that annual inflation rose by a modest 1.9% in August.

Governor Tiff Macklem cited a softening labor market and the removal of most retaliatory tariffs as key reasons for the rate reduction. In a statement, he said, “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.”

The central bank noted that Canada’s GDP slipped by about 1.5% in the second quarter of this year, largely due to U.S. tariffs on Canadian goods and general trade uncertainty. Canadian exports also fell by 27% in the second quarter.

According to Macklem, there was a “clear consensus” to lower the policy rate to better balance future economic risks.