Here’s the thing — Canada’s economy isn’t having an easy time right now. With rising U.S. tariffs and slowing exports, the Bank of Canada (BoC) is once again being pushed to act.
According to a Reuters poll of 34 economists, a majority expect the central bank to cut its overnight interest rate by 25 basis points on October 29, bringing it down to 2.25%. This would mark the second consecutive rate cut, signaling the bank’s growing concern about an economy under pressure.
Why Is Canada Cutting Rates Again?
Think about it this way: tariffs on steel, aluminum, and automobiles have hit Canada’s export engine hard. The economy contracted by 1.6% in the second quarter, unemployment remains high at 7.1%, and business confidence is fading fast.
BoC Governor Tiff Macklem recently hinted that the bank will place more emphasis on “potential risks” during its upcoming decision — a clear sign that caution and support are top priorities right now.
Despite inflation rising to 2.4%, still within the target range, most analysts agree that stimulating growth takes precedence. As CIBC’s chief economist Avery Shenfeld put it, “The priority at this point is still to provide some economic momentum to help close the slack and bring the unemployment rate down again.”
What Economists Expect Next
Out of the 34 economists surveyed between October 21 and 24:
- 23 expect a rate cut next week.
- 11 expect no change, with most predicting another cut in December.
If the BoC follows through, the rate will sit at the bottom of its neutral range (2.25%-3.25%), which neither stimulates nor restricts economic activity.
Interestingly, RBC economist Abbey Xu believes deeper cuts may be harder to justify: “Cutting beyond 2.25%, into outright stimulative levels, will be difficult with inflation still sticky and fiscal policy likely ramping up after the federal budget in early November.”
The Bigger Picture: What This Means for Canadians
If you’re a homeowner or planning to borrow, a lower rate usually means cheaper loans and mortgage relief. But it’s also a sign that the economy needs a push — not a celebration.
The U.S. trade tensions and uncertainty around the USMCA agreement, up for review next year, are creating more anxiety for policymakers. Economists warn that if the deal falters, the BoC might need to cut again in 2026 to protect Canada’s market stability.
Still, there’s a silver lining: the economy likely rebounded by 0.5% last quarter, and modest growth of 1.2% is expected this year and next — slow, but steady progress after tough quarters.
Frequently Asked Questions
1. Why is the Bank of Canada cutting interest rates again?
The rate cut aims to support Canada’s slowing economy, which has been hit by U.S. tariffs and weak exports. Lower rates make borrowing cheaper and encourage spending.
2. How much will the interest rate drop?
The Bank of Canada is expected to reduce the rate by 25 basis points to 2.25% — its second cut in a row.
3. Will there be more rate cuts in 2026?
Economists say it’s possible if trade tensions worsen or the U.S.-Mexico-Canada Agreement (USMCA) isn’t renewed.
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