"For many months, we have been stressing that monetary policy cannot undo the damage caused by tariffs. Increased trade friction with the United States means our economy will work less efficiently, with higher costs and less income. 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."
— Bank of Canada governor Tiff Macklem
Those words accompanied the October 29 interest-rate cut of .25 per cent and they put Canada's economic situation in perspective.
The new rate is 2.25 per cent. That's the lowest it has been in more than three years — since July 2022.
The central bank said it made the 25-basis-point cut as weakness ripples through the Canadian economy and with inflation expected to stay close to the bank's two per cent target. According to a story by the CBC, the bank also indicated that, if inflation evolves broadly in line with expectations, hovering around its two per cent target, it will hold rates at their current level.
However, if the outlook changes, Macklem said: "We are prepared to respond."
The B.C. Real Estate Association added this:
"The Bank appears reassured that it can focus on supporting the economy through rate-cuts without risking an acceleration of inflation, particularly given Canada is dropping most of its retaliatory tariffs. At 2.2 per cent, the overnight rate is at the bottom threshold of what the Bank considers neutral for the economy, and adequate to keep inflation at 2 per cent. Given a still uncertain outlook and the potential for further disruptions to trade policy, we anticipate the Bank may need to cut at least one more time over the next six months."
The next interest-rate announcement, the last one of 2025, is scheduled for December 10.