Another Canadian Central Bank Interest Cut but Perhaps the Last One of the Cycle – Currency Thoughts
Another Canadian Central Bank Interest Cut but Perhaps the Last One of the Cycle
October 29, 2025
The Canadian policy interest rate has been reduced by 25 basis points to 2.25%. This was the fourth such cut of 2025 and comes on top of 175 bps of easing during the final seven months of 2023. A statement explaining today’s decision and updated forecasts anticipates slow growth of less than 1.5% in both 2026 and 2027, a soft labor market and excess capacity being reabsorbed only gradually.
With ongoing weakness in the economy and inflation expected to remain close to the 2% target, Governing Council decided to cut the policy rate by 25 basis points. If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment. If the outlook changes, we are prepared to respond. The structural damage caused by the trade conflict reduces the capacity of the economy and adds costs. This limits the role that monetary policy can play to boost demand while maintaining low inflation.
As in the case of the U.S. rate cut today, the size of Canada’s decrease was correctly anticipated by analysts.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Canada
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