Interest rate cuts: Bank of Canada, U.S. Fed both drop benchmark rates by quarter-point

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09/17/25 16:25

Canadian dollar weakened, U.S. dollar supported after rate cuts

- Reuters

The Canadian dollar weakened about 0.2% against its U.S. counterpart after the Bank of Canada reduced its key policy rate by 25 bps to a three-year low of 2.5%, as expected, citing a weak jobs market and less concern about underlying pressures on inflation.

The U.S. dollar fell to a fresh four-year low against the euro before reversing losses to trade higher on the day in a choppy session after the Federal Reserve also cut interest rates by a quarter of a percentage point.

The dollar index, which measures the U.S. currency against six others, was 0.3% higher at 96.926.

09/17/25 16:05

Wall Street ends mixed after U.S. Fed interest rate cut

- Reuters

The Nasdaq and the S&P 500 closed lower in choppy trading on Wednesday, after the U.S. Federal Reserve cut interest rates by an expected 25 basis points and Fed Chair Jerome Powell cited the weak job market.

The Dow closed higher after meandering during Powell’s speech.

According to preliminary data, the S&P 500 lost 6.63 points, or 0.10 per cent, to end at 6,600.13 points, while the Nasdaq Composite lost 73.10 points, or 0.33 per cent, to 22,260.85. The Dow Jones Industrial Average rose 262.26 points, or 0.56 per cent, to 46,012.75.

The Fed’s decision and outlook will test Wall Street’s recent rally, which has been supported by rate-cut expectations and revived enthusiasm around AI-stock-linked trading.

09/17/25 15:28

Fed’s Powell said central bank is cutting 10% of its staff

– Reuters

Federal Reserve Chairman Jerome Powell said Wednesday the U.S. central bank is undergoing a notable reduction in the ranks of those who work for the institution. The Fed leader, speaking in a press conference, said the central bank is currently in the process of shedding 10 per cent of its staff and “at the end of that” Fed staffing will be where it was a decade ago.

On the prospect of reforms of the Fed, Powell said “we’re certainly open to constructive criticism and ways to do our jobs better,” but he leaned against the need for a formal review of the central bank.

09/17/25 14:40

U.S. stock indexes mixed after Fed’s rate cut

– Reuters

The S&P 500 briefly rose while the Nasdaq slipped in choppy trading on Wednesday, after the U.S. Federal Reserve cut interest rates by an expected 25 basis points.

The central bank indicated it will steadily cut rates for the rest of the year, with projections showing two more quarter-percentage-point cuts, as policymakers signalled concerns about weakness in the labor market.

This rate cut was already priced in by investors, according to data compiled by LSEG. The Dow Jones Industrial Average was already in positive territory, where it remained after the Fed’s move.

“A majority of the FOMC is now targeting two further cuts this year, indicating that the doves on the committee are now in the driver’s seat. We think it would take a significant upside surprise in inflation or labor market rebound to take the Fed off its current easing trajectory,” said Simon Dangoor, Head of Fixed Income Macro Strategies at Goldman Sachs Asset Management.

At 2:05 p.m. ET, the Dow Jones Industrial Average rose 437.93 points, or 0.96 per cent, to 46,195.83, the S&P 500 gained 8.47 points, or 0.13 per cent, to 6,615.23 and the Nasdaq Composite lost 50.93 points, or 0.22 per cent, to 22,284.13.

09/17/25 14:00

U.S. Fed lowers key interest rate by quarter-point, signals more cuts this year

– Reuters

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The Federal Reserve cut interest rates by a quarter of a percentage point on Wednesday and indicated it will steadily lower borrowing costs for the rest of this year, as policymakers responded to concerns about weakness in the job market in a move that won support from most of U.S. President Donald Trump’s central bank appointees.

Only new Governor Stephen Miran, who joined the Fed on Tuesday and is on leave as the head of the White House’s Council of Economic Advisers, dissented in favor of a half-percentage-point cut.

The rate cut, along with projections showing two more quarter-percentage-point reductions are anticipated at the remaining two policy meetings this year, indicate Fed officials have begun to downplay the risk that the administration’s voluble trade policies will stoke persistent inflation, and are now more concerned about weakening growth and the likelihood of rising unemployment.

The cut, the first move by the policy-setting Federal Open Market Committee since December, moves the policy rate to the 4.00 per cent to 4.25 per cent range.

“The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen,” the Fed said in its policy statement. “Job gains have slowed, and the unemployment rate has edged up.”

Fed Chair Jerome Powell will hold a press conference at 2:30 p.m. ET to elaborate on the latest statement and economic outlook.

New economic projections showed policymakers at the median still see inflation ending this year at 3 per cent, well above the central bank’s 2-per-cent target, a projection unchanged from the Fed’s last set of forecasts published in June. The projection for unemployment was also unchanged at 4.5 per cent and economic growth slightly higher at 1.6 per cent versus 1.4 per cent.

Read the full story here.

09/17/25 13:45

Opinion: The case for a rate cut was clear, but the future remains cloudy

– Jeremy Kronick and Steve Ambler

The Bank of Canada cut was widely anticipated by financial markets. The cracks in the Canadian economy we mentioned in these pages after the bank’s last announcement in July have become far more visible.

Gross domestic product contracted at an annualized pace of 1.6 per cent in the second quarter, stirring fears of a possible recession on the horizon. Per capita GDP has contracted or stagnated in nine of the last 12 quarters. In the face of tariffs and uncertainty related to tariffs, exports fell a whopping 30 per cent annualized in the quarter while imports fell by 5 per cent. The temporary boost provided by front-running of tariffs earlier in the year evaporated.

Employment tells the same story, and the story is not good. Employment fell by more than 100,000 positions in July and August, with full-time jobs held by people of prime working age bearing the brunt. The unemployment rate hit 7.1 per cent in August, its highest since2016, outside of the pandemic.

Making matters worse, the fall in employment is dispersed widely across sectors. In the six months leading to June, nearly two-thirds of the sectors making up the Canadian economy experienced contracting employment. The wide dispersion means that employment losses are not confined to sectors directly vulnerable to the current tariff wars.

If the effects were more confined, targeted fiscal policy on its own might make the most sense. However, while fiscal policy will still be needed – and, indeed, seems set to take hold – it means that monetary policy stimulus, which is a blunt tool, is appropriate.

Cracks in GDP and employment were part of our concern when the bank held last time. The reason for the bank holding then was more about inflation, and in particular core inflation. But here, cracks have been exposed as well.

Read the full column here.

09/17/25 12:35

What’s next?

– Mark Rendell

• The next Bank of Canada interest rate decision will be announced on Oct. 29, when the bank will also publish a new quarterly Monetary Policy Report.
• The U.S. Federal Reserve will announce its latest rate decision today at 2 p.m. ET, followed by a news conference with Chair Jerome Powell at 2:30. The Fed is widely expected to cut by a quarter-point. Analysts will be poring over the summary of economic projections, particularly the “dot plot,” for hints about where U.S. interest rates go from here.
• The Bank of England and the Bank of Japan will announce interest rate decisions Thursday and Friday respectively. Both are expected to hold rates steady.
• The federal government will release its budget Nov. 4.
• Uncertainty remains around trade negotiations with the United States. Prime Minister Mark Carney has said he’s trying to secure “small” sectoral tariff deals for steel, aluminum, autos and lumber but has given no sense of a timeline. The government is also shifting its attention to the USMCA renewal talks, which will kick into gear in the coming months as the continental free trade pact approaches the six-year review date.

09/17/25 12:00

Money markets on the probability of an October rate cut

– Darcy Keith

Money market traders grew a little more doubtful that October will bring another rate cut as the Bank of Canada news conference wore on and Governor Tiff Macklem made it clear the bank would not provide much forward guidance this time around on the trajectory of future rate moves.

Implied probabilities in overnight index swap markets now suggest a 40-per-cent probability of a rate cut at the bank’s next meeting, on Oct. 29, down from about 50 per cent when the rate decision was announced earlier today, according to LSEG data. There’s now about a 62-per-cent probability priced into markets of another rate cut coming before 2025 draws to a close.

So if Mr. Macklem is trying to temper further easing expectations, he’s finding some success.

Investors must now sit tight for what the U.S. Federal Reserve has to say later today, which is likely to have a much bigger impact on markets overall. In case you’re curious, the latest swaps pricing suggests a 95-per-cent probability of a 25-basis-point Fed rate cut being announced at 2 p.m. and a 5-per-cent chance of an even bigger, 50-basis-point cut.

09/17/25 11:21

Macklem on slowing population growth

– Nojoud Al Mallees

“Historically, population growth has evolved pretty smoothly, and so we have sort of certain rules of thumb about what potential growth can be, how many new workers you would expect to be added to the labour market every month. We need to adjust those rules of thumb to the reality that population growth is lower.”

09/17/25 11:12

Macklem on the impact of tariffs on specific sectors

– Mark Rendell

“The way the U.S. has implemented them, the tariffs in place in the Canadian economy are applied to very specific sectors: steel, automobiles, aluminum. You’ve got Chinese tariffs on canola, pork and seafood. You’ve now got higher U.S. tariffs on softwood lumber, tariffs on copper. For the rest of the economy, for other sectors, tariffs remain very low, providing your business is compliant with CUSMA. So the impacts are very concentrated in these sectors that have been hit and the services that are servicing those. … Monetary policy is a blunt instrument. We can help the overall economy adjust, but we can’t support, we can’t target individual sectors. Fiscal policy really is a much better instrument for that.”

09/17/25 11:07

Macklem on the removal of retaliatory tariffs and the impact on the rate decision

– Nojoud Al Mallees

“The risk for us is that a temporary increase in those prices has knock-on effects to other prices, and then it starts to look like ongoing inflation. From our perspective, now, the fact that the direct effect of the countertariffs has been removed, that takes away the first-round effect, so there won’t be a second-round effect. … That has taken off some of the upside risk to future inflation, and that was one of the things that tilted the risks today in favour of cutting the interest rate.”

09/17/25 11:02

Macklem on why the BoC cut its benchmark rate today

– Mark Rendell

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“As we have for the last couple of meetings, we considered two alternatives: Hold the policy rate where we are, or cut the policy rate. What tipped the balance really in favour of a cut this time was there was a clear sense that the balance of risk had shifted. … The labour market has softened further. The inflation picture hasn’t really changed a great deal. … Total CPI inflation came out yesterday at 1.9 per cent. … CPI ex-tax came out 2.4 yesterday. … If you look at our core measures … they remain around 3. If you look under the hood, though, what you can see is that earlier in the year we saw some upward momentum in those core measures. If you look at the more recent monthly readings on the core measures, that momentum has come off.”

09/17/25 10:57

Macklem on the trajectory of interest rates

– Mark Rendell

“The reality is tariffs are increasing trade friction with our biggest trading partner and that has efficiency costs. Monetary policy can’t undo that. It can’t reverse that. What we can do is help the economy adjust while maintaining well-controlled inflation, that’s what we’re focused on. … We’ve demonstrated today, if the risks tilt, if the risks shift, we’re prepared to take action. And if the risks tilt further, we’re prepared to take more action. But we’re going to take it one meeting at a time. We are taking a shorter horizon, we’re being a little less forward-looking than usual. And we’ll make that risk assessment in October, when we get there.”

09/17/25 10:50

Macklem on fiscal policy and the upcoming federal budget

– Nojoud Al Mallees

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“From our macro perspective, it’s less about individual measures and more about how everything fits together, what the overall macro impact is. And certainly, once we have the budget, we will be assessing the implications of government’s plans on the economic outlook, what that means for growth, for inflation and, ultimately, for what we need to do with interest rates.”

Prime Minister Mark Carney’s government is set to table the federal budget on Nov. 4.

09/17/25 10:40

Rate cuts mean the economy is on shaky ground. Here are three ways to prepare

– Erica Alini

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Lower interest rates mean the economy may be headed for trouble.

Central banks cut rates to make it cheaper for companies and people to borrow, which helps stimulate economic activity. It’s a shot in the arm when the economy looks anemic.

This latest Bank of Canada rate cut, in particular, signals that the financial pain of tariffs is starting to get real and spread. The unemployment rate is 7.1 per cent, the highest it’s been since 2016 outside the pandemic. So far, it’s been mostly tariff-sensitive manufacturing sectors and young graduates who’ve felt the brunt of the weak job market. But that’s beginning to change.

Here are four things to weigh to help you manage your finances as economic storm clouds gather:

• Should you boost your emergency fund? One thing to consider is how secure your job is. The other is how long it may take you to land a new one. With employers trimming back on hiring, unemployment spells are getting longer.
• Is this a good time to buy a house? In many ways, yes. Mortgage rates – both fixed and variable – are trending down. In many cities, there are plenty of homes for sale, and competition from other buyers, while picking up, remains relatively muted. The big asterisk here is, once again, your job security. If you’re even remotely worried about it, you may want to hold off on buying.
• What should I do with my investments? The stock market often loves rate cuts. Investors’ assumption is that cheaper borrowing will lead companies and consumers to spend more. So cuts by the Bank of Canada – and, even more importantly, by the U.S. Federal Reserve – could push already high stock prices even higher. Don’t let that tempt you into making risky financial bets. Generally, a weak economy eventually takes its toll on financial markets, too.

09/17/25 10:33

Economists react to today’s BoC rate cut

– Darcy Keith

Here’s how economists are reacting to the Bank of Canada’s rate decision:

Stephen Brown, deputy chief North America economist, Capital Economics

“The relatively neutral tone of the Bank’s policy statement suggests that it is not necessarily expecting to cut rates again in October. … Crucially, the Bank dropped the line from its previous policy statement that said “if a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate.” Nonetheless, the Bank reiterated that it will be assessing the extent to which weakness in exports “spills over into business investment, employment, and household spending,” how “trade disruptions are … passed on to consumer prices” and “how inflation expectations evolve.” That leaves the door to another interest rate cut this year if, as we expect, economic growth remains weak while core inflation pressures remain under control."

Katherine Judge, senior economist, CIBC Economics

“The statement emphasized that policymakers are data dependent and are monitoring the effects of shifts in trade that will add to costs even as they weigh on economic activity, and they will also assess the degree of spillover into other areas of the economy and how inflation expectations evolve in judging if another cut is in the cards ahead. In our view, the economy is losing resilience and inflation will continue to be contained by the elevated unemployment rate and removal of retaliatory tariffs and we therefore see another 25-basis-point cut in October.”

Taylor Schleich and Ethan Currie, economists with National Bank Financial

“Conventional wisdom says that if you’re going to cut once, you’re probably going to go again (does a single 25-basis-point move the needle in significant fashion?). Note that the empirical record supports this view as the only time the Bank has held, then cut, then held was the mini 2015 easing cycle when the policy rate was at or below 1%. The BoC is trying to temper easing expectations as they remove the line from the July decision that said “further rate cuts may be necessary,” but a follow-on cut in October is our expectation, nonetheless. And while our base case outlook entails a 2.25% terminal rate (i.e., just one more cut), risks have clearly swung towards more easing being delivered. Finger in the air, we’d assign a 40% probability to the terminal rate settling at 2% (or lower). Incoming economic/inflation data, an October Business Outlook Survey, Canada-U.S. trade developments and a fall budget will all help guide that view.”

Tony Stillo, director of Canada Economics, and Michael Davenport, senior economist, at Oxford Economics

“We don’t think this is the beginning of a new cutting cycle that will see rates fall deeply into stimulative territory. We expect the BoC to cut by another 25 basis points in October but then pause and hold rates at 2.25% - the low end of its neutral range estimate - through 2026. The BoC remains in a bind as it weighs the upside risks to inflation against the downside risks to growth from the trade war. Moreover, major fiscal stimulus is likely to be laid out in the federal budget this fall, which will do most of the heavy lifting to support the economy in the near term.”

Royce Mendes,managing director and head of macro strategy, Desjardins

“The Bank of Canada still seems wary of assuming that all of the impacts of U.S. trade policy are in the rearview mirror, particularly with regards to inflation. That’s left markets relatively unchanged after the rate cut announcement. In contrast, our work suggests that those fears about inflation won’t materialize. As a result, we continue to believe that the Bank of Canada will cut rates again in October and ultimately take the policy rate down to a terminal rate of 2.00%.”

09/17/25 10:23

What the BoC rate cut means for mortgages

– Rachelle Younglai

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Hello, cheaper mortgages.

The most common mortgage rate could soon start at 3 per cent instead of 4 per cent after the Bank of Canada cut its benchmark interest rate today.

And although home loans will only become slightly cheaper, mortgages that start with 3 per cent can be a psychological turning point for would-be buyers.

“A mortgage rate starting with a 3 is helpful,” said Clinton Wilkins, principal broker with Centum Home Lenders Ltd. who has been brokering mortgages in Nova Scotia for more than 20 years

“Once those rates are widely available, it will add some demand in the market,” he said.

“Having a 3 handle on mortgage rates is an important psychological hurdle for buyers,” said Penelope Graham, a mortgage expert with rate comparison web site Ratehub.ca

Some lenders are already advertising mortgages with an interest rate that starts at 3 per cent. But they are not widespread.

So far this month, the average rate was 4.1 per cent on a five-year variable-rate product and 3.97 per cent on a five-year fixed-rate mortgage, according to data from Mortgagelogic.news.

But the most popular lenders – the big Canadian banks – are still advertising rates above 4 per cent, according to their websites.

Read more about what falling interest rates means for mortgage holders.

09/17/25 10:20

Markets react to today’s BoC rate cut

– Darcy Keith

No big surprise here for markets, though there was a little bit of softening in the Canadian dollar as the decision came out, with the loonie falling to 72.62 U.S. cents from 72.70.

There was a little bit of an uptick, though, in the S&P/TSX Composite Index. It’s up about 0.25 per cent, versus a nearly unchanged S&P 500. Among stocks seeing some of the most positive gains are dividend stocks, which investors tend to gravitate to when interest rates fall and make returns in competing income products, such as bonds and cash, less attractive.

Bond yields softened a bit, too, with the Canadian two-year bond losing about another basis point, to trade about two basis points lower.

Unlike today’s decision, markets are not really convinced another rate cut will be announced at the next BoC meeting, on Oct. 29.

Implied probabilities in overnight index swaps suggest odds are about even on another 25-basis-point cut at that time, according to LSEG data. That said, markets are convinced the rate-cutting cycle won’t end with today’s decision and are fully pricing in another cut by Jan. 28 of next year. That would bring the overnight rate down to 2.25 per cent.

But markets aren’t pricing in much further easing over the course of next year. The verdict from traders: The monetary easing cycle may not be over, but it’s close to reaching its conclusion. Assuming, of course, the economy stays relatively afloat.

09/17/25 10:12

Key quotes from Macklem’s opening statement

– Nojoud Al Mallees

On the inflation outlook:

“Although there are still some mixed signals, on balance, recent data suggest the upward pressures on underlying inflation have diminished.”

On tariffs:

“Tariffs are having a profound effect on several key sectors, including the auto, steel and aluminum industries. Chinese tariffs on canola, pork and seafood, new U.S. tariffs on copper and higher U.S. tariffs on softwood lumber will spread the direct impacts further.”

On business investment:

“Many businesses have told us they have paused investment plans given elevated uncertainty about U.S. trade policy. Businesses are also concerned that demand in Canada will weaken as the economic fallout broadens.”

On Canada’s removal of retaliatory tariffs:

“The federal government’s recent decision to remove most retaliatory tariffs on imported goods from the United States will mean less upward pressure on the prices of these goods going forward.”

On what the Bank of Canada is watching:

“We are paying close attention to how exports evolve given the impact of U.S. tariffs and changing trade relationships; how much this spills over into business investment, employment and household spending; how the cost effects of trade disruptions and reconfigured supply chains are passed on to consumer prices; and how inflation expectations evolve.”

09/17/25 10:07

Canada’s real estate market poised for more activity with today’s BoC rate cut

– Rachelle Younglai

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Today’s interest rate cut by the Bank of Canada will likely motivate more prospective buyers to enter the real estate market.

That would support a recent market upswing that has seen sales on the rise over the past five months and August purchases hit a four-year high for that month.

While the BoC had cut its benchmark rate seven times from June, 2024, through March of this year, many buyers have been reluctant to make a purchase.

Mortgage rates and home prices were still relatively high. And the trade war with the U.S. has led to job losses and the threat of a severe economic slowdown.

Now that the central bank’s interest rate has been cut to 2.5 per cent from 2.75 per cent, realtors say the pent-up demand could soon be unleashed.

“If rates come down, people will come back into the market,” said Shaunese Lawrence, a mortgage agent with Clover Mortgage who has been brokering home loans in the Toronto region since 2013.

Ms. Lawrence said she has lost count of the number of people who are saying: “I just want to get something.” Last year she did not broker any mortgages for home purchases; she only worked on mortgage renewals and refinancings.

In the past few weeks, she said, buyers have been putting in offers every day. “It’s totally night and day and it is literally in the past couple of weeks.”

Don Kottick, the president of Re/Max Canada, said would-be buyers are getting comfortable with the uncertainty brought on by the trade war. “We have started to see this uptick even though we don’t know what will come,” he said.

09/17/25 10:02

Bank of Canada mum on future path of interest rates

– Nojoud Al Mallees

The Bank of Canada’s interest rate announcement today came with no hints about the future path of its policy rate.

Governor Tiff Macklem said in his opening remarks that there was a “clear consensus” to lower the central bank’s policy rate today, but he provided no forward guidance on where rates are headed next. Instead, today’s announcement emphasized the uncertainty looming over the economy.

“Governing council judged that a reduction in the policy rate was appropriate to better balance the risks going forward,” Mr. Macklem said. “The Bank will continue to assess the risks, look over a shorter horizon than usual and be ready to respond to new information.”

Many economists anticipate the central bank will cut interest rates again this year in response to increasing slack in the economy and easing price pressures. Growth has stalled, the job market is loosening, and Canada’s removal of many retaliatory tariffs should help on the inflation front.

The BoC acknowledged those realities today, but Mr. Macklem also highlighted ongoing risks to the inflation outlook.

“The disruptive effects of shifts in trade will add costs even as they weigh on economic activity. It is difficult to predict the extent of cost increases, where they will show up and how they could be passed through to consumer prices,” he said.

The bank did not release economic forecasts with its interest rate decision today. In its last two quarterly monetary policy reports, it published multiple scenarios of what could happen to the economy based on the state of trade.

09/17/25 09:50

Bank of Canada cuts interest rate by quarter-point to 2.5 per cent

- Mark Rendell

The Bank of Canada cut its benchmark interest rate by a quarter-point today, lowering borrowing costs for the first time since March as U.S. tariffs continue to batter the Canadian economy.

As widely expected, the bank’s governing council voted to lower the policy rate to 2.5 per cent from 2.75 per cent. This follows three consecutive rate decisions in which the central bank held the rate steady.

The bank has been reluctant to ease monetary policy amid a trade war with the United States, given the possibility that U.S. tariffs and Canadian countertariffs could push up consumer prices and reignite high inflation. But that calculus has shifted as unemployment has risen, exports have plummeted, and inflation has remained relatively benign.

“Considerable uncertainty remains. But 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,” Bank of Canada Governor Tiff Macklem said in prepared remarks.

Mr. Macklem said there was a “clear consensus” for a cut, but he gave few hints about where interest rates will go from here, saying the bank would “look over a shorter horizon than usual and be ready to respond to new information.”

09/17/25 09:15

Fed expected to cut amid weakening job market, political pressure

- Mark Rendell

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After the Bank of Canada rate announcement, attention will shift to Washington, where the U.S. Federal Reserve is expected to announce its own interest-rate cut this afternoon amid souring economic indicators and mounting political pressure to ease monetary policy.

The Fed has been on hold since December, wary that tariffs could push up consumer prices and unconvinced that the robust U.S. economy needed more support. That sentiment appears to have changed in recent months, as the U.S. job market has stalled while inflation hasn’t increased as much as many economists expected.

Financial markets now expect the Fed to lower its policy rate by a quarter-point today, with traders betting on additional cuts through the fall. Because the Fed has cut less than the BoC or most other central banks – the target range for the federal funds rate is 4.25 to 4.5 per cent – it has a long way to go before getting interest rates back to a neutral level.

Any decision to cut, however, will carry a whiff of politics. U.S. President Donald Trump has spent months lambasting Fed Chair Jerome Powell and demanding that the Fed, which is meant to be independent of politics, lower interest rates.

The President has also aggressively tried to overhaul the Fed’s voting body, appointing Stephen Miran, a close economic adviser, as an interim governor and attempting to fire governor Lisa Cook – a move she is fighting in court.

The rate announcement is scheduled for 2 p.m. ET, followed by a news conference with Mr. Powell at 2:30.

Analysts will be watching for hints about future rate cuts and poring over the quarterly Summary of Economic Projections, which will contain a new “dot plot” outlining where Fed committee members see interest rates going over the next three years and in the longer run.

09/17/25 08:50

Bay Street sees cut today, with another to follow

- Mark Rendell

As far as financial markets are concerned, a rate cut today is a slam dunk. What’s less clear is where interest rates go from here.

Interest rate swap traders put the probability of a quarter-point cut by the Bank of Canada today above 90 per cent, according to LSEG data.

Most Bay Street analysts are likewise convinced the BoC is going to resume easing after three consecutive holds. Twenty-five of 32 economists polled by Reuters last week said they expect a quarter-point cut today. That includes analysts at five of the six big Canadian banks, with RBC the only outlier.

Looking further out, swap markets are pricing in only one additional cut after Wednesday, which would leave the policy rate at 2.25 per cent through next year. Analysts expect a similar trajectory, although some see the BoC needing to lower rates more to boost a sluggish economy.

09/17/25 08:15

August inflation report solidifies expectations for a BoC rate cut

– Nojoud Al Mallees

Statistics Canada’s August inflation report, released Tuesday, solidified expectations that the Bank of Canada will resume cutting interest rates today.

The annual inflation rate rose to 1.9 per cent in August, from 1.7 per cent in July, but came in lower than analysts were anticipating.

The BoC has held off on cutting interest rates since March, opting to monitor how the trade war with the U.S. evolves and whether high inflation remains at bay.

Economists were somewhat concerned by a pick-up in inflation in the spring and the prospect of the trade war raising prices further. But those anxieties have faded.

But they say that in hindsight the higher inflation in the spring was being driven by retaliatory tariffs that Canada had placed on U.S. goods.

Prime Minister Mark Carney dropped many of Canada’s retaliatory tariffs this month in a bid to further trade negotiations with the U.S. The move was applauded by Canadian businesses that said the countermeasures were raising prices for consumers.

Economists say the BoC’s focus now needs to shift to supporting the economy, which has stalled under the weight of U.S. tariffs.

09/17/25 07:00

Bank of Canada expected to resume rate cuts after three holds

- Mark Rendell

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After a string of seven rate cuts, the Bank of Canada has been sitting tight since March, waiting to see how global trade disruptions hit the Canadian economy and affect consumer prices.

In recent months, the picture has become clearer: Inflation has remained relatively contained, while U.S. tariffs have hammered exports and pushed up unemployment in Canada. That has set the stage for another round of monetary policy easing, with the BoC expected to lower borrowing costs to give the sluggish Canadian economy a jolt.

Financial markets and Bay Street analysts widely expect a quarter-point cut today, which would take the bank’s policy rate down to 2.5 per cent.

Until now, the BoC has been wary of cutting interest rates further, given the possibility that U.S. tariffs and Canadian countertariffs could drive up consumer prices and touch off another round of high inflation. But Canada has dropped most of its retaliatory tariffs in recent months, and the Canadian dollar has strengthened, easing upward pressure on the prices of imported goods.

The August inflation numbers, published Tuesday, were the last hurdle to clear and showed nothing that would prevent the BoC from cutting. Annual headline inflation rose slightly to 1.9 per cent, but the closely watched core inflation measures eased.

Inflation hasn’t disappeared entirely as a concern. But downside risks to Canada’s tariff-battered economy are likely to take centre stage. Gross domestic product contracted 1.6 per cent, at an annualized rate, in the second quarter, and unemployment is at 7.1 per cent, the highest level since 2016 outside the pandemic.

Monetary policy is a blunt instrument that can’t target the sectors hit hardest by the trade war: steel, aluminum, autos and lumber. But rate cuts could help shore up consumer spending and business investment more broadly, as well as provide a spark to the housing market.

With markets fully pricing in a rate cut today, the big question is where interest rates go from here. The BoC won’t publish a new forecast today, so analysts will focus on any signals Governor Tiff Macklem sends out about the possibility of additional cuts this fall.

The rate decision will be announced at 9:45 a.m. ET, followed by a news conference with Mr. Macklem and Senior Deputy Governor Carolyn Rogers at 10:30 a.m. ET.

Read more about today’s expected Bank of Canada decision.