Sunday, October 26, 2025

Bank of Canada Cuts Rates 25 Basis Points To 3%

The Bank of Canada has reduced its benchmark interest rate by 25 basis points to 3%, marking its sixth consecutive rate cut since mid-2024. The Bank Rate now stands at 3.25%, while the deposit rate is 2.95%. This move aims to stimulate economic activity amid persistent uncertainties, including the looming threat of U.S. trade tariffs.

In its January Monetary Policy Report, the Bank of Canada outlined a cautiously optimistic outlook for global growth, projecting a steady pace of 3% over the next two years. U.S. growth forecasts were upgraded due to stronger consumption, while the euro area faces subdued growth amid competitiveness challenges. China’s recent policy measures are expected to support near-term growth despite structural issues.

Domestically, Canada’s economy shows mixed signals. Past rate cuts have bolstered consumption and housing activity, but business investment remains weak. The unemployment rate stood at 6.7% in December, with recent job growth offering some relief. Inflation hovers near the 2% target, though temporary factors like tax adjustments have caused volatility.

The Bank of Canada also announced plans to conclude its quantitative tightening program in early 2025. After shrinking its balance sheet by nearly 40% since April 2022, the Bank will resume gradual asset purchases to stabilize and modestly grow its balance sheet in alignment with economic expansion.

While the Canadian dollar has depreciated against the U.S. dollar due to trade uncertainties, oil prices have been volatile but slightly higher than prior projections. The Bank forecasts GDP growth of 1.8% in both 2025 and 2026, slightly above potential growth, which should gradually absorb excess supply in the economy.


Information for this briefing was found via the Bank of Canada and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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