The Bank of Canada has lowered its target for the overnight rate by 25 basis points to 2.25%, with the Bank Rate now at 2.5% and the deposit rate at 2.20%

Source: Bank of Canada

In its latest Monetary Policy Report (MPR), the Bank resumed providing detailed projections for both the global and Canadian economies. Although the economic effects of recent U.S. trade actions are becoming clearer, policymakers noted that uncertainty remains unusually high given the unpredictable nature of U.S. trade policy.

Global Outlook

Despite holding up well against the sharp rise in U.S. tariffs, the global economy is starting to show strain. Trade patterns are shifting, and prolonged tensions have dampened business investment worldwide. The Bank expects global growth to slow from about 3.25% in 2025 to roughly 3% through 2026–2027.

• United States: Growth remains solid, supported by AI-driven investment, but job creation is cooling and tariffs are pushing prices higher.
• Euro area: Slower exports and weaker domestic demand are weighing on growth.
• China: Exports to the U.S. are down, but stronger trade with other nations has softened the blow. Still, business investment remains sluggish.

Global financial conditions have eased since July, oil prices have stayed relatively stable, and the Canadian dollar has dipped slightly against the U.S. dollar.

Canadian Economy

Canada’s economy shrank by 1.6% in Q2, largely due to falling exports and low business investment amid trade-related uncertainty. Meanwhile, household spending remained steady, providing some offset.

Trade disputes, especially in autos, steel, aluminum, and lumber, continue to hit key industries. Overall, GDP growth is projected to remain weak through the end of 2025, with modest recovery ahead as exports and business investment gradually rebound.

The Bank projects real GDP growth of 1.2% in 2025, 1.1% in 2026, and 1.6% in 2027, with a gradual pickup beginning next year.

Labour Market

The labour market remains soft. Employment rose slightly in September after two months of heavy losses, but hiring continues to lag in trade-sensitive sectors. The unemployment rate sits at 7.1%, and wage growth has slowed. A slower pace of population growth means fewer new jobs are needed to stabilize employment levels.

Inflation and Policy Outlook

Headline CPI inflation stood at 2.4% in September, a bit above expectations, while core inflation measures are hovering around 3%. Broader indicators suggest underlying inflation remains close to 2.5%, and the Bank expects it to ease toward 2% over the coming months.

Given the combination of economic weakness and stable inflation, the Governing Council decided to cut the policy rate by 25 basis points. Officials consider the current rate level appropriate for supporting the economy while keeping inflation near target, but say they remain ready to adjust if conditions change.

“The Canadian economy is navigating a difficult transition,” the report notes. “Structural damage from trade disruptions has reduced capacity and increased costs, limiting the role monetary policy can play in stimulating growth without jeopardizing price stability.”

Looking Ahead

• Next rate announcement: December 10, 2025
• Next Monetary Policy Report: January 28, 2026

To read more local news and updates, please check our BLOG PAGE
To view Geoff Jarman’s Listings, CLICK HERE

Tags: Bank of Canada interest rate cut, Bank of Canada lowers policy rate October 2025, Bank of Canada interest rate, Canada overnight rate news, Bank of Canada monetary policy update, Bank of Canada October 2025 rate announcement, Canada GDP slowdown 2025, Canadian economy and US tariffs, Canada unemployment rate October 2025, Canada CPI inflation October 2025, impact of Bank of Canada rate cut on mortgages, Canada housing market and interest rates, Canada core inflation trends 2025, mortgage rates after Bank of Canada cut, economic outlook Canada fall 2025, burnaby realtor, burnaby realtors