Bank of Canada Delivers Expected Cut, Indicating Likely End Of Easing Cycle
BoC exits current easing cyle
- Governing Council lowers lending rates by 25bps - Bank chief signals high bar for further rate cuts - MPR returns to base-case projections - Staff projections revise growth lower and inflation higher - Macklem says trade policy could weaken the economy
The Bank of Canada’s Governing Council lowered its target for the overnight rate by 25 basis points to 2.25%, setting the Bank Rate at 2.50% and the deposit rate at 2.20%.
As anticipated, policymakers opted to ease policy at the conclusion of Wednesday’s meeting but suggested the rate-cutting cycle is now likely complete.
“With ongoing weakness in the economy and inflation expected to remain close to the 2% target, the Governing Council decided to cut its policy rate,” the statement said. “If inflation and economic activity evolve broadly in line with the October projection, the current policy rate is about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment.”
TD Securities’ Robert Both said the message “effectively removes the Bank of Canada’s easing bias and sets up a shift back to the sidelines in December.” He added that the central bank will remain data-dependent, ready to adjust if the outlook changes. There was no mention of T-bill purchases or balance-sheet policy in either the statement or the accompanying Monetary Policy Report (MPR).
MPR returns to base-case forecasts
Sources: Statistics Canada and Bank of Canada calculations, estimates and projections
With greater clarity on the impact of tariffs, the BoC said it had returned to its usual practice of publishing a single projection for the global and domestic economies in the MPR, abandoning the dual-scenario approach used earlier this year.
In revisions to its June report, staff trimmed growth projections slightly and raised inflation estimates.
“Economic growth in Canada is projected to strengthen from around 0.75% in the second half of 2025, with annual growth averaging 1.4% over 2026 and 2027. Inflation is expected to remain around 2% over the projection horizon,” the bank said.
Both noted that the updated report “incorporated a 1.5-percentage-point impact from tariffs through 2026, down from 3.9pp in the January MPR.”
Macklem warns of negative trade effects
Governor Tiff Macklem told reporters after the announcement that US tariffs and ongoing trade uncertainty had weakened domestic demand, forecasting only “very modest growth” through year-end with a moderate pickup in 2026.
He added that the trade conflict was “adding costs for many businesses and putting upward pressure on inflation.”
Macklem cautioned that the weakness in the Canadian economy went beyond the normal business cycle. “The structural damage caused by tariffs is reducing our productive capacity and adding costs,” he said, signalling that the power of monetary policy to offset such effects is limited.
JP Morgan’s Michael Hanson said that the guidance raised the bar for another rate cut in December. “While we still expect weaker growth and a higher unemployment rate this year— which ought to be a material enough deviation from the bank’s forecast to warrant additional easing in December— it now may also take some easing in various inflation measures to convince the BoC to ease near year-end.”
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- Governing Council lowers lending rates by 25bps
- Bank chief signals high bar for further rate cuts
- MPR returns to base-case projections
- Staff projections revise growth lower and inflation higher
- Macklem says trade policy could weaken the economy
By Harry Daniels
LiveSquawk News
@HarryDaniels71
29 October 2025 | 21:00 GMT
The Bank of Canada’s Governing Council lowered its target for the overnight rate by 25 basis points to 2.25%, setting the Bank Rate at 2.50% and the deposit rate at 2.20%.
As anticipated, policymakers opted to ease policy at the conclusion of Wednesday’s meeting but suggested the rate-cutting cycle is now likely complete.
“With ongoing weakness in the economy and inflation expected to remain close to the 2% target, the Governing Council decided to cut its policy rate,” the statement said. “If inflation and economic activity evolve broadly in line with the October projection, the current policy rate is about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment.”
TD Securities’ Robert Both said the message “effectively removes the Bank of Canada’s easing bias and sets up a shift back to the sidelines in December.” He added that the central bank will remain data-dependent, ready to adjust if the outlook changes. There was no mention of T-bill purchases or balance-sheet policy in either the statement or the accompanying Monetary Policy Report (MPR).
With greater clarity on the impact of tariffs, the BoC said it had returned to its usual practice of publishing a single projection for the global and domestic economies in the MPR, abandoning the dual-scenario approach used earlier this year.
In revisions to its June report, staff trimmed growth projections slightly and raised inflation estimates.
“Economic growth in Canada is projected to strengthen from around 0.75% in the second half of 2025, with annual growth averaging 1.4% over 2026 and 2027. Inflation is expected to remain around 2% over the projection horizon,” the bank said.
Both noted that the updated report “incorporated a 1.5-percentage-point impact from tariffs through 2026, down from 3.9pp in the January MPR.”
Governor Tiff Macklem told reporters after the announcement that US tariffs and ongoing trade uncertainty had weakened domestic demand, forecasting only “very modest growth” through year-end with a moderate pickup in 2026.
He added that the trade conflict was “adding costs for many businesses and putting upward pressure on inflation.”
Macklem cautioned that the weakness in the Canadian economy went beyond the normal business cycle. “The structural damage caused by tariffs is reducing our productive capacity and adding costs,” he said, signalling that the power of monetary policy to offset such effects is limited.
JP Morgan’s Michael Hanson said that the guidance raised the bar for another rate cut in December. “While we still expect weaker growth and a higher unemployment rate this year— which ought to be a material enough deviation from the bank’s forecast to warrant additional easing in December— it now may also take some easing in various inflation measures to convince the BoC to ease near year-end.”