The Bank of Canada is expected to cut its overnight interest rate by 25 basis points to 2.25% on Oct. 29, its second straight cut, to stimulate an economy weakened by U.S. tariffs. A Reuters poll found 70% of economists expected the move, despite recent increases in inflation.
Canada’s unemployment rate is at an all-time high, while exports have been hit by tariffs on steel, aluminum and autos. The economy contracted 1.6% in the second quarter but was partially cushioned by the USMCA trade deal that will be reviewed next year.
BoC Governor Tiff Macklem said the central bank will focus on economic risks in its upcoming monetary policy decisions. Analysts expect the 2.25% rate to remain through 2025, in line with the BoC’s neutral rate range.
CIBC economist Avery Shenfeld expects this will likely be the last cut, but additional steps may be needed in 2026 if USMCA talks fail. Meanwhile, RBC expects further cuts below 2.25% to be difficult to implement as inflation remains high.
Canada's economy is expected to grow 0.9% this quarter and average 1.2% this year and next. Inflation is forecast to remain around 2.4%, while unemployment is expected to remain around 7.1% through the second half of 2026.
