Bank of Canada cuts key interest rate to 2.5% as U.S. tariff risks shift
The Bank of Canada cut its benchmark interest rate by a quarter point today as the central bank worries less about inflation risks and more about a slowing economy.
The Bank of Canada’s policy rate now stands at 2.5%, which breaks a streak of three consecutive holds at 2.75% since March.
READ: Bank of Canada holds key rate at 2.75% as economy shows resilience to tariffs
Governor Tiff Macklem says risks have shifted since the central bank’s last rate decision in July and policymakers felt it was the right time to shore up the economy against U.S. trade disruption.
He says the pressure the Bank of Canada saw in underlying inflation has diminished in recent months while the labour market has softened and Canadian exports have fallen sharply.
READ: Inflation ticks higher to 1.9% in August, short of economists’ expectations
Macklem also says the federal government’s decision to drop most retaliatory tariffs against the United States at the start of this month will take some fuel out of inflation.
Uncertainty tied to U.S. tariffs has come down a little in the Bank of Canada’s view, but policymakers signalled they’ll still be watching how trade impacts affect prices and economic growth as the central bank weighs future rate decisions.
