The Bank of Canada lowered its policy interest rate by 25 basis points to 2.25% on Wednesday, marking its fourth rate cut of 2025. The decision comes as growth slows and inflation nears the 2% target, continuing the BoC’s cautious easing cycle.
The move was widely expected. Live rate probabilities on our dashboard reflected a high likelihood of a cut after September’s inflation print showed headline CPI at 2.4%, while core measures continued to ease. [BoC inflation source]
A Year of Steady Easing
| Date | Policy Rate |
|---|---|
| Jan 29 | 3.00% |
| Mar 12 | 2.75% |
| Sept 17 | 2.50% |
| Oct 29 | 2.25% |
The Bank’s statement noted that while inflation is easing, it remains slightly above target. Elevated interest rates have dampened both consumer spending and business investment. Policymakers also acknowledged that growth has underperformed due to “the cumulative effects of past rate increases.”
Economic Backdrop
Canada’s unemployment rate held at 7.1% in September, signaling a weakening labour market. Wage growth has moderated, and housing activity has slowed in major cities as households adjust to higher debt costs. [StatsCan labour source]
Economists view the rate cut as a move to prevent a deeper slowdown without reigniting inflation. The Bank’s tone remained cautious, with future moves depending on shelter costs, wage trends, and inflation expectations.
Impact on Borrowers and Markets
Variable-rate mortgage holders will see lower prime lending rates. Fixed-rate borrowers could see gradual relief if bond yields continue falling, though lenders may delay passing through full savings.
On the markets, bond yields dipped and the Canadian dollar held steady. Traders interpreted the move as aligned with previous guidance and consistent with gradual easing.
Looking Ahead
Focus now shifts to the final policy meeting of the year on December 10. Markets are pricing a possible cut to 2.00%, which would be the lowest rate since 2023.
With inflation nearing target and growth softening, the BoC aims to manage a “soft landing”—easing enough to support demand without triggering a rebound in inflation.
📊 View live rate probabilities on our dashboard or visit BankofCanadaOdds.com for daily updates.
