At the conclusion of its September meeting, the Bank of Canada (BoC) announced it was lowering its policy interest rate by 25 basis points (bps). The BoC was holding steady at recent meetings as it monitored trade tensions with the US and its impact on Canada’s economy. The US Federal Reserve Board (Fed) also decided to cut interest rates at its September meeting.

• The BoC lowered its benchmark overnight interest rate to 2.50% from 2.75%. This marked the BoC’s first rate cut since March as it had held steady to monitor how tariffs were impacting inflation and Canada’s economy.
• Canada’s central bank noted that a rate cut was warranted with the labour market weakening and economic growth stalling. Inflation appears contained, remaining below the BoC’s target over the past two months. The BoC sees little upside risk to inflation.
• The BoC said it would “proceed carefully” with any changes to monetary policy going forward.
• The Fed cut the target range of its federal funds rate by 25 bps to 4.00%-4.25%. This was the Fed’s first rate cut of 2025.
• The Fed is concerned about labour market conditions. The Fed also believes inflation remains elevated. Economic activity has slowed, which combined with a weaker labour market, resulted in the Fed’s rate cut. Updated projections show the possibility of two more rate cuts this year.

The reductions at both central banks were widely expected by economists, according to a Bloomberg survey. In Canada, the BoC hopes it will help support the economy and labour market. The rate cut might help the real estate market by potentially bringing more buyers to the market. Markets are expecting more cuts from both central banks this year.

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