Bank of Canada Cuts Key Rate 25 Basis Points to 2.50% on Weaker Economy

10:00 AM EDT, 09/17/2025 (MT Newswires) -- The Bank of Canada Wednesday cut its target for the overnight rate by 25 basis points to 2.50%, with the Bank Rate at 2.75% and the deposit rate at 2.45%, matching most economists' expectations.

In the months ahead, slow population growth and a weaker labor market are likely to weigh on household spending, the central bank said in a statement.

Employment has declined over the past two months since the BoC's July Monetary Policy Report, with job losses concentrated in trade-sensitive sectors and hiring elsewhere slowing. The unemployment rate has risen since March, reaching 7.1% in August.

Consumer price inflation was 1.9% in August, unchanged from July. Broader indicators, including core inflation measures and the distribution of price changes across CPI components, continue to point to underlying inflation of about 2.5%, the bank said.

The federal government's recent decision to remove most retaliatory tariffs on U.S. imports will ease upward pressure on the prices of those goods, according to the BoC.

With a softer economy and less risk of inflation picking up, the Governing Council judged that lowering the policy rate was appropriate to "better balance" the risks. It cautioned that trade disruptions will continue to add costs even as they dampen economic activity.

The council said it will closely watch how U.S. tariffs and shifting trade relationships affect exports, business investment, employment, and household spending, as well as how the cost effects of supply-chain changes feed through to consumer prices and inflation expectations.

The Bank of Canada reiterated that it aims to support economic growth while ensuring inflation remains well controlled.

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