Bank of Canada Cuts Key Interest Rate to 2.25%

On Wednesday, the Bank of Canada announced that it has lowered its benchmark interest rate by 25 basis points to 2.25%, warning that monetary policy cannot repair the structural damage caused by the ongoing US trade war, CBC reported (10-29-25).

The central bank said the decision followed signs of economic weakness across multiple sectors and expectations that inflation will remain near its 2.0% target.

“For many months, we have been stressing that monetary policy cannot undo the damage caused by tariffs,” Governor Tiff Macklem said.

Increased trade friction with the US means the Canadian economy “will work less efficiently, with higher costs and less income. Monetary policy can help the economy adjust as long as inflation is well-controlled, but it cannot restore the economy to its pre-tariff path,” Macklem said.

The bank said in its release that if inflation and economic growth evolve “broadly in line” with its current projections, it considers the current rate “at about the right level” to keep inflation on target while guiding the economy through a period of change.

In its Monetary Policy Report released alongside the interest rate announcement, the bank warned that the trade conflict is “fundamentally reshaping” Canada’s economy.