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The Bank of Canada lowered its overnight rate to 2.5% on Wednesday, responding to mounting economic damage from US tariffs and a slowdown in hiring. The quarter-point cut was the first since March and met predictions from markets and economists. Governor Tiff Macklem, speaking in Ottawa, said the decision was unanimous. “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,” Tiff said. He confirmed there was “clear consensus” among policymakers to move ahead with easing, but refused to give any signals on future cuts. The central bank is reacting to worsening labor market data and a noticeable drop in exports and investment. Policymakers reported that Canada lost more than 106,000 jobs in July and August, mostly in sectors sensitive to global trade. Hiring has also slowed elsewhere. Unemployment now stands at 7.1%. Officials said these conditions—combined with the effects of US trade policy—created the need for rate relief. Bank holds back forward guidance, watches trade and inflation mix Tiff didn’t offer guidance about what happens next, walking back language from the July meeting that had left the door open to more cuts. He explained the bank would be “proceeding carefully,” and warned that “the disruptive effects of shifts in trade will continue to add to costs even as they weigh on economic activity.” The economy shrank by 1.6% on an annualized basis in the second quarter, matching the bank’s expectations. The decline came mostly from reduced exports and weak business investment. Tiff said consumption and housing were still holding up, but warned that “slow population growth and labor market weakness” could soon hit household spending. On tariffs, Tiff was direct: “Tariffs are having a profound effect on several key sectors,…

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Filed under: News - @ September 17, 2025 4:29 pm