The Bank of Canada has cut its overnight rate by 25 basis points to 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.
Published: November 18, 2025
Author: Nick & Zina Gewarges
With the effects of U.S. trade actions now clearer, the Bank has resumed providing a full economic outlook in its Monetary Policy Report, though uncertainty remains high. Global growth is expected to slow slightly over the next few years as trade tensions weaken investment and reshape trade relationships.
In the U.S., strong AI-driven investment is keeping growth solid, even as job gains cool and tariffs raise consumer prices. Europe’s economy is slowing, and China is seeing weaker business investment despite redirecting exports to other markets. Financial conditions have eased, and the Canadian dollar has slipped slightly.
Canada’s economy contracted by 1.6% in the second quarter as exports and business investment fell. Trade-sensitive industries like autos, steel, and lumber are being hit hard. Household spending remains steady, and growth is expected to improve gradually as investment and exports recover.
The labour market is soft, with recent job losses and an unemployment rate holding at 7.1%. Wage growth has eased, and slower population growth means fewer new jobs are needed to maintain employment levels.
The Bank expects GDP growth of 1.2% in 2025, 1.1% in 2026, and 1.6% in 2027. Inflation was 2.4% in September, slightly above expectations, while core inflation sits around 2.5%. The Bank expects inflation to stay near its 2% target.
Given ongoing economic weakness, the Bank lowered its policy rate and believes it is now at an appropriate level, though it is prepared to adjust if the outlook changes. Canada continues to face a difficult adjustment due to lasting damage from the trade conflict, and the Bank aims to ensure confidence in price stability as the economy transitions.