Bank of Canada cuts key interest rate as economy slows

September 17, 2025

RED FM News Desk

The Bank of Canada has lowered its benchmark interest rate by 25 basis points to 2.5 per cent, citing weaker economic conditions and easing inflationary pressures.

The move, announced Wednesday, marks the first rate cut since March and was widely expected by economists after Statistics Canada reported annual inflation slowed to 1.9 per cent in August.

Governor Tiff Macklem pointed to a softening labour market and the removal of most Canadian retaliatory tariffs as key factors behind the decision.

“With a weaker economy and less upside risk to inflation, Governing Council judged that a reduction in the policy rate was appropriate to better balance the risks going forward,” Macklem said in a statement.

Canada’s economy shrank by about 1.5 per cent in the second quarter, weighed down by U.S. tariffs and broader trade uncertainty. Exports also dropped 27 per cent in the same period, following a surge earlier in the year as businesses rushed shipments ahead of tariff deadlines.

Macklem said there was a “clear consensus” within the Governing Council to cut rates in an effort to support growth.