Bank of Canada announces new rate cut

The Bank of Canada has lowered its benchmark interest rate, cutting by 25 basis points amid continuing signs of a softening national economy.

The central bank said on Wednesday morning it was bringing that policy rate, which directly impacts variable mortgage rates, down to 2.25% in a decision widely expected by most economists.

That marks the Bank’s ninth rate cut since June of last year and moves the trendsetting rate 175 points lower than it sat prior to the beginning of that rate-cutting cycle.

Inflation, a key consideration for the BoC in its rate decisions, increased in September and the national economy surprisingly added tens of thousands of jobs the same month.

Normally, those developments might convince the Bank against a rate cut as it weighs up potential upside pressure on inflation. But trade tensions are also continuing to mount, with US president Donald Trump recently vowing fresh tariffs on Canada and stepping away from talks with Canadian negotiators.

Canada’s unemployment rate has also remained stubbornly high, hovering above 7%, with jobless numbers especially stark in Ontario and in tariff-impacted industries.

What’s more, business and consumer sentiment appears to be weakening – and prominent commentators including Canadian Imperial Bank of Commerce (CIBC) deputy chief economist Benjamin Tal have suggested the country is already in a recession, even if it’s not a statistical one yet.

The latest cut marks good news for homeowners holding a variable-rate mortgage and hopeful homebuyers. Fixed rates, which are influenced more strongly by bond yield movement, may not budge after the Bank’s decision – but variable rates will be on the way down in the days ahead.

Wednesday’s decision marks the Bank’s second-to-last scheduled rate announcement of 2025. It’s set to meet for the last time this year on December 10, a move that will be closely followed by market watchers to see whether another cut is on the way.

Source: Canadian Mortgage Professional