The Bank of Canada is lowering its key interest rate amid signs of a slowing global economy.
In a long-awaited announcement on Wednesday morning, the Bank reduced the rate from 2.75 per cent to 2.5 per cent.
The bank rate is also lowered, from three to 2.75 per cent, and the deposit rate is down from 2.7 to 2.45 per cent.
The Bank said it was a case of "something had to give" after Canada's Gross Domestic Product (GDP) fell by 1.5 per cent in the second quarter of 2025, thanks to uncertainty over tariffs imposed by the Trump administration.
"Exports fell by 27 per cent in the second quarter, a sharp reversal from first-quarter gains when companies were rushing orders to get ahead of tariffs," read a statement from the Bank. "Business investment also declined in the second quarter."
Since the last rate announcement at the end of July, unemployment in Canada has risen, mainly in trade-sensitive areas most affected by tariffs. However, with the federal government removing most of the retaliatory tariffs against the U.S., the Bank suggested that it would lead to less pressure on prices.
The Bank noted that tariffs have also had an effect on the economy of our American neighbours.
"In the United States, business investment has been strong, but consumers are cautious, and employment gains have slowed," read a release from the Bank. "U.S. inflation has picked up in recent months as businesses appear to be passing on some tariff costs to consumer prices.
The Bank said it will continue to examine the effects of tariffs on the economy as the exporting of goods evolves and global trade relationships continue to be adjusted.
The next rate announcement is on Wednesday, October 29.
