Key Interest Rate

The Bank of Canada is keeping its key interest rate at 2.25 per cent, saying inflation is close to target, but the economy is still facing challenges.

Governor Tiff Macklem said the rate is positioned to balance inflation control with support for the economy as it undergoes a structural adjustment.

“Given how we see things right now, we think the policy rate is about right … providing a little bit of support to the economy to help it work through this structural adjustment,” Macklem said.

He pointed to stronger‑than‑expected growth in the third quarter and recent job gains, but cautioned that Canada’s economy still has excess supply and growth will remain modest.

“The recent data, as we’ve discussed, is showing some improvement and that is welcome news, but it has not changed our view that the economy is still in excess supply and we continue to expect modest growth going forward,” Macklem said.

Senior Deputy Governor Carolyn Rogers highlighted affordability concerns, noting that households are still struggling with higher costs for essentials such as food and shelter.

“The CPI measures the rate of growth of prices. It doesn’t measure the level change in prices that has happened … and Canadians are still feeling that,” Rogers said.

The Bank’s release said consumer price inflation slowed to 2.2 per cent in October, with core measures between 2.5 and 3 per cent.

Officials expect trade volatility to weigh on GDP in the fourth quarter, even as domestic demand shows signs of improvement.

Macklem added that monetary policy cannot restore lost supply but can help the economy adjust as long as inflation is controlled.

“Our priority is to maintain confidence in price stability during this period of global upheaval,” Macklem said.

The Bank of Canada reports that the key interest rate is now 2.25 percent after a quarter-point decrease.

Governor Tiff Macklem said the move is meant to support the economy while keeping inflation near the two per cent target.

“With this cut and based on this outlook, we think the current policy rate is about right.

But we recognize there’s a lot of uncertainty out there. And if … the outlook changes … we’re prepared to respond,” Macklem said.

He said household spending and housing are expected to remain resilient.

“By lowering interest rates, we are providing a bit more support to consumption and housing.

So we expect that they will continue to contribute to growth. Government spending is also contributing to growth in our forecast,” he said.

Macklem also pointed to the limits of monetary policy in the face of U.S. tariffs.

“Monetary policy can help the economy adjust as long as inflation is well controlled. But it cannot restore the economy to its pre‑tariff path,” he said.

Senior Deputy Governor Carolyn Rogers said the Bank’s plan to normalize its balance sheet remains unchanged.

“Our plan hasn’t changed, and if it does, we’ll provide advance notice,” Rogers said.

The Bank’s latest Monetary Policy Report projects weak growth through the rest of this year, with GDP expected to expand by 0.5 per cent in the third quarter and one per cent in the fourth.

Growth is forecast to pick up gradually in 2026 and 2027 as exports and business investment recover.

Inflation was 2.4 per cent in September, slightly higher than expected. Core inflation measures remain close to three per cent but are showing signs of easing.