Bank of Canada lowered interest rate amid economic slowdown
Canada’s central bank, the Bank of Canada, lowered its key interest rate by 25 basis points to 2.50% on Wednesday, 17 September 2025, marking its first rate cut since March.
The decision follows signs of weakening economic activity and a slowing labour market.
Canada’s economy contracted by about 1.5% in the second quarter, with job losses exceeding 100,000 over the past two months. Unemployment has reached a nine-year high outside of the pandemic years.
Governor Tiff Macklem said, “With a weaker economy and less upside risk to inflation, the Governing Council judged that a reduction in the policy rate was appropriate to better balance the risks of going forward,” said Macklem in a statement to journalists. “The federal government’s recent decision to remove most retaliatory tariffs on imported goods from the United States will mean less upward pressure on the prices of these goods going forward.”
Inflation remains a consideration, with August’s consumer price index up 1.9% year-over-year, while core inflation measures stayed near the top of the bank’s 1–3% target.
The central bank said the rate cut aims to balance economic risks, with further easing possible later this year.
