The Bank of Canada has reduced its target for the overnight rate by 25 basis points, setting it at 2.5%. The Bank Rate now stands at 2.75% and the deposit rate at 2.45%.

Source: Bank of Canada

September 17, 2025

Economic Backdrop
Global growth has started to soften after holding up against higher U.S. tariffs and ongoing trade uncertainty. In the U.S., business investment remains solid, but consumer spending has slowed and job gains have weakened. Europe is also experiencing a slowdown as trade frictions weigh on exports, while China’s economy shows signs of cooling after a relatively strong first half of the year.

In Canada, GDP contracted by about 1.5% in the second quarter. Exports dropped sharply, down 27%, as companies adjusted to tariffs, reversing gains from earlier in the year. Business investment also declined, though household consumption and housing activity continued to grow. For context, see Statistics Canada GDP data.

Labour Market and Inflation
Employment has fallen over the past two months, particularly in sectors directly affected by trade, while hiring elsewhere has been weak. The unemployment rate rose to 7.1% in August, with wage growth continuing to ease.

Headline inflation was 1.9% in August, while core measures remain closer to 2.5–3%. However, upward momentum has slowed, and the removal of most Canadian retaliatory tariffs on U.S. imports is expected to reduce future price pressures.

Policy Outlook
With slower growth and reduced inflation risks, the Bank’s Governing Council judged that lowering the policy rate was appropriate to help balance economic risks. The Bank noted it will continue to monitor how trade disruptions affect exports, business investment, employment, and consumer prices.
The next policy rate announcement is scheduled for October 29, 2025, alongside the release of the Bank’s Monetary Policy Report.

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 September 2025, Bank of Canada 2.5 percent 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 August 2025, Canada CPI inflation August 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