Ottawa – October 29, 2025 — The Bank of Canada has reduced its benchmark overnight rate by 25 basis points to 2.25%, citing ongoing economic weakness, a soft labour market, and the lingering effects of U.S. trade actions. The Bank Rate now stands at 2.5%, while the deposit rate is 2.20%.
In its Monetary Policy Report (MPR) released today, the Bank said the Canadian economy continues to struggle under the weight of global trade tensions and slowing exports, particularly in sectors such as autos, steel, aluminum, and lumber. Canada’s economy contracted 1.6% in the second quarter, and growth is expected to remain subdued through the end of 2025.
Despite a resilient global economy, the effects of U.S. tariffs and trade uncertainty are becoming clearer. “Trade relationships are being reconfigured and ongoing tensions are dampening investment in many countries,” the Bank noted, projecting global growth to slow from 3.25% in 2025 to around 3% in 2026–27.
The Bank expects Canadian GDP to grow by just 1.2% in 2025, followed by 1.1% in 2026 and 1.6% in 2027. Labour market conditions remain soft, with the unemployment rate holding at 7.1% in September and wage growth slowing.
Inflation stood at 2.4% in September, slightly above expectations, while core inflation measures have been “sticky” around 3%. However, the Bank forecasts inflation to ease and remain near its 2% target over the next two years.
“With ongoing weakness in the economy and inflation expected to remain close to target, Governing Council decided to cut the policy rate by 25 basis points,” the statement said. “If inflation and economic activity evolve broadly in line with the projection, the current rate is at about the right level to keep inflation close to 2% while supporting recovery.”
The Bank also warned that the trade conflict has caused structural damage to the economy, limiting the extent to which monetary policy can boost growth. “The Bank is focused on ensuring Canadians continue to have confidence in price stability through this period of global upheaval,” it said.
The next interest rate announcement is scheduled for December 10, 2025, with the next full Monetary Policy Report to be released on January 28, 2026.
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