Name: Bank of Canada cuts key interest rate to 2.25%
Uploaded: 2025-10-30T02:52:01.907Z
Duration: 2 min 3 s
Description: The Bank of Canada made a 25-basis-point cut to its key interest rate while governor Tiff Macklem suggested rates will hold where they are as long as inflation stays in the target range of two per cent.

The Bank of Canada made a 25-basis-point cut to its key interest rate while governor Tiff Macklem suggested rates will hold where they are as long as inflation stays in the target range of two per cent.

Ottawa

The Bank of Canada has cut its key interest rate by 25 basis points to 2.25%, marking its lowest level since 2022 and the fourth reduction this year. The central bank made the decision despite inflation remaining above its 2% target, citing concerns over a weak job market, sluggish economic growth, and stalled trade talks.

The rate cut aims to make borrowing cheaper for consumers and businesses, with the hope of stimulating economic activity. The bank forecasts GDP growth at 1.2% for the year, significantly lower than earlier expectations due to the effects of US tariffs on key Canadian industries. While the bank signaled that further rate cuts are unlikely unless economic conditions worsen, it remains prepared to act if necessary.

Bank of Canada cuts key interest rate to 2.25%

The central bank cut the rate by 25 basis points to 2.25%, its lowest since 2022. The downward move is the fourth by the Bank of Canada this year. Okay, so what does it all mean? Nisha Patel is here with us. So Nisha, walk us through this. Inflation is above the bank's 2% target and yet it's cutting the key interest rate. What is the thinking here? Yeah, the bank seems to be thinking that inflation is under control and on its way back to that 2% target, its bigger concern is the sluggish economy. The job market is weak, growth is shaky, and there's even more uncertainty now that trade talks are stalled. So this rate cut will make borrowing money cheaper for anyone with a variable rate mortgage, for small business owners, and the hope is, is that it will encourage spending to kind of boost the economy. Okay, given all that, where does the forecast for future growth sit? Well, the central bank says that GDP growth is likely to come in at 1.2% this year. That's a lot lower than was expected before the US tariff started. And those tariffs are hammering Canadian sectors, autos, steel, forestry, we've been hearing about the hammering that they're taking. And Bank of Canada Governor Tiff Macklem says this goes well beyond a regular downturn. The US trade conflict has diminished Canada's economic prospects. The structural damage caused by tariffs is reducing the productive capacity of the economy, and it's adding costs. The Bank of Canada, not alone in its concern about the economic outlook, the US Federal Reserve also cut interest rates today, trying to boost the economy in the job market there. More interest rate cuts coming here? The bank actually signaled that rate cuts might be over for now, that if inflation and growth follow the path that they think they will, this is the right level for the benchmark interest rate. The caveat being if there's any kind of economic curveball, the central bank will have to step up to the plate. And there always are those. All right, Nisha Patel, thank you.

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