The Bank of Canada lowered its target overnight interest rate by 25 basis points to 2.25%, as expected, for the third consecutive meeting. The decision was announced earlier today, Wednesday, October 29. The interest rate for banks is now 2.50%, and the deposit rate is 2.20%.

The Bank’s report stated that economic growth and inflation are beginning to show some signs of the effects of US trade measures, and that the impact is becoming more pronounced. The Canadian economy contracted by 1.6% in the second quarter, reflecting a decline in exports and weak business investment amid increasing uncertainty. The Canadian labor market remains weak, with job gains in September following two months of losses. The unemployment rate remained at 7.1% in September, and wage growth has slowed. The Bank of Canada expects the Canadian economy to grow by 2.4% in September of this year, 1.1% next year, and 1.6% in 2027.

The Consumer Price Index (CPI) inflation rate reached 2.4% in September, slightly higher than the Bank’s forecast. Excluding taxes, inflation was 2.9%, while core inflation remained around 2.5%. The Bank anticipates that inflationary pressures will ease in the coming months and that inflation will remain close to its 2% target.

Given the continued weakness of the economy and the expectation that inflation will remain close to the 2% target, the Bank believes that the 25-basis-point interest rate cut was appropriate to balance risks. The Bank will focus on ensuring Canadians’ confidence in price stability during this period of global volatility and supporting economic growth while keeping inflation under control.