FX.co ★ Bank of Canada Delivers 25bps Cut as Expected

In its October 2025 meeting, the Bank of Canada reduced its benchmark overnight rate by 25 basis points to 2.25%, aligning with market expectations. The central bank hinted that, should its primary economic forecast hold amid the prevailing uncertainties, it might conclude the current cycle of rate cuts. This decision follows a similar 25 basis point reduction in the previous meeting, marking the first cut since March. This move was driven by headline inflation, which remains around the 2% target, alongside pressures such as U.S. tariffs and a decelerating job market, prompting the Governing Council to opt for more accommodative financing conditions. Policymakers highlighted that the ongoing trade conflict has inflicted structural damage, reducing the economy's capacity, evidenced by the annualized 1.6% contraction in the Q2 GDP. Nevertheless, the Bank of Canada anticipates GDP growth of 1.2% this year and 1.1% in the following year. Meanwhile, the central bank's preferred core inflation measures persistently hover around the 3% mark, though the Council indicates an expectation for underlying price growth to gradually align with the target under the present rate environment.