Bank of Canada Interest Rate Cut to 2.5% from 2.75% – Currency Thoughts

Bank of Canada Interest Rate Cut to 2.5% from 2.75%

September 17, 2025

Today”s correctly anticipated 25-basis point reduction of the Canadian policy interest rate followed a half-year pause in monetary easing. The new overnight rate level is half the size of the 5.0% peak that had been maintained from July 2023 until an initial reduction in June 2024. In these tariff-laden times, the Bank of Canada is attempting to strike a balance between rising upside inflation risks and a more difficult prognosis for economic growth. According to a statement, a fresh interest rate cut now seemed appropriate, and the dollar to further easing remains. “Preferred measures of core inflation have been around 3% in recent months, but on a monthly basis the upward momentum seen earlier this year has dissipated.”  Canadian real GDP contracted in the second quarter by 1.6% at an annualized rate compared to the first quarter level led by a plunge in exports,, and employment posted significant declines in both July and August.

Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: Bank of Canada

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