In this blog:
What Does the Bank of Canada do?
Eight times a year, the Bank of Canada (BOC) announces its benchmark lending rate based on an assessment of the Canadian economy. This rate directly impacts variable interest rate products, such as mortgages, loans, and lines of credit, as banks and lenders adjust their prime rates accordingly. Understanding these changes can help you make informed financial decisions. For more information, take a look at our blog post summarizing four of the most frequently asked questions regarding the BOC.
Below, we break down the latest announcement and what it means for you.
Were there any Changes to the Interest Rate?
Canada’s central bank reduced its key interest rate from 2.50 percent to 2.25 percent today, aiming to bolster spending and investment while the economy adjusts to the effects of US trade policies.
What Information did the Bank Share about the Economy?
Canadian Economy
- Canada’s economy is currently going through a challenging transition period as weaker exports, slower business investment, and global trade uncertainty weigh on growth.
- GDP contracted by 1.6 percent in the second quarter and is expected to remain weak through the rest of 2025, with modest growth of about 1.2 percent for the year overall.
- The labour market has remained soft, with unemployment sitting at 7.1 percent in September and wage growth slowing down.
- Inflation was slightly higher than projected in September, hitting 2.4 percent. Core inflation has held between 2.5 and 3 percent.
- The Bank expects inflationary pressures to ease in the months ahead and stay close to the 2 percent target over the next few years.
Global Economy
- Trade tensions and US tariffs are disrupting investment and supply chains, leading many countries to adjust their trading relationships.
- The US economy is experiencing slower job growth and rising consumer prices as a result of tariffs, but strong investment in artificial intelligence is helping fuel overall growth.
- Global financial conditions have eased and oil prices remain stable, while the Canadian dollar has depreciated slightly against the US dollar.
How does this Impact Me?
- Variable-rate loan holders will see a fairly immediate decrease to their payments as a result of today’s announcement.
- Lower borrowing costs can help stimulate the economy through more affordable loans and increased spending power, encouraging Canadians to spend and invest.
Will there be any Interest Rate Changes in the Near Future?
The final Bank of Canada rate announcement with take place on December 10, 2025. Governing Council aims to keep inflation near the 2 percent target, and will adjust its overnight lending rate accordingly.
Most economists believe the Bank of Canada is nearing the end of its rate-cutting cycle. While some predict one final cut of 0.25 percent in December, others expect the current rate to hold into 2026 as the bank monitors inflation and the broader economic slowdown.
