Bank of Canada Cuts Rate to 2.25% as Economy Faces Trade Headwinds
The Bank of Canada has officially cut its key interest rate once again, bringing it down to 2.25% . This move, announced on October 29, 2025, is being seen as a crucial effort to shield Canadian businesses and households from the growing economic strain caused by global trade tensions and recent U.S. tariffs.
Now, this marks another step in what many are calling the final phase of the central bank’s rate-cutting cycle—a process that started back in May 2024 when rates were first lowered after years of aggressive hikes. Back then, inflation was finally cooling, and the housing market seemed to be finding its balance. But new challenges have since emerged. With U.S. President Donald Trump reinstating tariffs on key Canadian exports like metals, autos, and other goods, Canada’s economy has once again come under pressure.
Also Read:- Valentin Vacherot Triumphs Again Over Cousin in Paris Masters Clash
- Daniel Altmaier Battles Hard but Falls Short in Paris Masters Clash
The Bank of Canada’s Governor, Tiff Macklem , was clear in his message: monetary policy has its limits. He explained that while lowering interest rates can support borrowing and spending, it can’t solve structural issues like trade disruptions or declining productivity. “Monetary policy can’t help companies find new markets or reconfigure their supply chains,” Macklem said. The bank’s report reinforced that the main goal remains maintaining low and stable inflation, not fixing every ripple caused by international policy changes.
With this latest move, much of the focus now shifts to Ottawa , where the federal government is preparing to unveil its long-awaited budget next week. The expectation is that fiscal policy—through targeted government spending and stimulus—will now have to take the lead. Economists believe this budget could bring the largest deficit Canada has seen in years, signaling that the government may lean heavily on infrastructure and industry support to counter the slowdown.
According to RBC economist Nathan Janzen, the Bank’s tone “leans more explicitly than we thought” toward ending further rate cuts and instead passing the baton to fiscal measures. In other words, the Bank of Canada has likely reached the lower bound of its easing strategy, and it’s now up to the government to drive the next stage of economic support.
The numbers paint a cautious picture. The Bank expects GDP growth to average just 1.4% annually through 2027 , a significant downgrade from previous forecasts. While lower borrowing costs might bring relief to some households and businesses, uncertainty over trade, productivity, and investment is expected to keep economic momentum muted.
In short, the central bank’s latest decision is both a lifeline and a warning. It’s a lifeline for borrowers who may benefit from cheaper credit—but also a signal that the easy monetary fixes are nearly exhausted. From here on, Canada’s recovery will depend far more on government policy, global stability, and how quickly the country can adapt to a rapidly changing economic landscape.
Read More:
0 Comments