Capital Group Investment Director Notes Bank of Canada Stressing Monetary Policy's Limited Ability to Boost Demand While Taming Inflation

12:37 PM EDT, 10/29/2025 (MT Newswires) -- The Bank of Canada cut its overnight rate by 25bps to 2.25% on Wednesday, following a 25bps reduction at its previous meeting in September, said Kathrin Forrest, Equity Investment Director at Capital Group.

This now puts the policy rate at the lower end of the BoC's estimated neutral range, with an eye towards reigniting domestic demand growth, noted Forrest.

Market expectations for a cut had been building over the past two weeks despite ongoing stickiness in inflation, with both headline and core inflation measures remaining above the midpoint of the BoC's 1%-3% target range.

However, demand is facing headwinds, in part from the impact of United States tariffs and trade uncertainty on prices and confidence, pointed out the Capital Group equity investment director.

The most recent Canadian Survey of Consumer Expectations suggests a negative impact on consumer spending from high prices of goods and services and economic uncertainty, while firm's investment expectations remain subdued amid a soft sales outlook, excess capacity, and limited ability to pass on higher costs.

The Bank indicated it would pause policy rate changes, depending on inflation and economic trends, stressing monetary policy's limited ability to boost demand while keeping inflation low.

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