The Bank of Canada delivered another cut to interest rates by 25 basis points Wednesday, which lowers its overnight rate to 2.25 per cent.
Commercial banks set their lending rates to customers based on the Bank of Canada’s benchmark.
This means Canadians with variable rate loans like a mortgage will likely see their costs come down, and those applying for loans may soon see better rate options available.
Wednesday’s move marks the fourth cut by the central bank in 2025 and the second since March after September’s cut.
The Bank of Canada has been gradually adjusting its monetary policy down from a peak of five per cent in April 2024, after raising rates to curb red-hot inflation.
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After announcing the cut, the central bank noted the ongoing “uncertainty” the trade war and tariffs bring to policy makers, which may make it difficult to predict if more cuts could be coming soon.
Tariffs imposed by the United States have led businesses and economies across the globe to seek alternative trading partners to avoid higher costs, and in some cases have pulled back on investing and even laying off workers.
“While the global economy has been resilient to the historic rise in US tariffs, the impact is becoming more evident. Trade relationships are being reconfigured and ongoing trade tensions are dampening investment in many countries,” said the Bank of Canada Wednesday in a statement.
“Canada’s economy contracted by 1.6 per cent in the second quarter, reflecting a drop in exports and weak business investment amid heightened uncertainty. Canada’s labour market remains soft. Job losses continue to build in trade-sensitive sectors and hiring has been weak across the economy.”
Governor Tiff Macklem at the Bank of Canada will deliver remarks and answer questions from the media at 10:30 a.m. Eastern time.
– More to come
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