BoC delivered a widely expected 25bps rate cut, lowering its overnight rate to 2.25%, but signaled that this could mark the end of its current easing cycle. The central bank said that if inflation and economic activity evolve in line with its October projection, the current policy rate is “about the right level” to balance supporting growth with keeping inflation close to target. That phrasing was interpreted as indicating that 2.25% is the likely terminal rate, barring major economic shocks.
In its accompanying statement, the BoC acknowledged that U.S. trade actions and uncertainty are having “severe effects” on key export-oriented industries. As a result, the Bank expects GDP growth to remain weak in the second half of the year before recovering gradually through 2026. The economy is projected to expand 1.2% in 2025, 1.1% in 2026, and 1.6% in 2027, with excess capacity expected to be absorbed only slowly.
The BoC described the labour market as soft, with job declines concentrated in trade-sensitive sectors, while hiring across the broader economy remains subdued.
On inflation, the BoC noted that headline CPI stood at 2.4% in September, slightly above expectations, while its preferred core measures remain sticky around 3%. Broader alternative indicators suggest underlying inflation near 2.5%, but the BoC expects price pressures to ease gradually and headline CPI to remain close to 2% over the projection horizon.
