The Bank of Canada has hinted that its cycle of interest rate cuts may be coming to an end, following its latest policy meeting in Ottawa. While the central bank trimmed the key rate to 2.25 percent, officials signaled a pause ahead, citing improved inflation control but persistent economic uncertainty.
Central Bank Holds Steady After Latest Cut
In its latest decision, the Bank of Canada reduced the overnight lending rate by 25 basis points to 2.25 percent, marking the second cut this year. Governor Tiff Macklem said the bank now views monetary policy as “about right” for returning inflation to the 2 percent target.
He added, however, that the bank “remains prepared to respond if the outlook changes,” emphasizing that policymakers will keep options open amid global and domestic risks.
“We believe interest rates are now at an appropriate level to maintain price stability, but we’ll act if inflation or growth shifts materially,” Macklem said during a press briefing.
Inflation Moderates as Growth Slows
The BoC reported that inflation has eased near its 2 percent target, supported by softer consumer spending and cooling housing demand. However, the economy continues to face challenges from slower exports and tight labor markets, which could complicate future policy decisions.
Economic forecasts suggest GDP growth will slow to 1.2 percent in 2025 before rebounding modestly in 2026. The bank expects headline inflation to average 2.0 percent this year and remain close to target over the medium term.
Financial analysts say the BoC’s cautious stance reflects a balance between preventing economic slowdown and ensuring inflation remains under control.
Market Reaction and Global Impact
The Canadian dollar strengthened slightly against the U.S. dollar after the announcement, as markets interpreted the message as the end of the easing cycle. Economists expect the BoC to hold rates steady for several months before considering any move in 2026.
The decision also aligns with other major central banks, including the U.S. Federal Reserve and European Central Bank, which have signaled that global interest rates may have reached their lower limits.
Conclusion
With inflation near target and growth stabilizing, the Bank of Canada appears ready to pause its rate-cutting campaign — but it remains vigilant to changing economic conditions. The message is clear: policy flexibility stays on the table, but further easing is unlikely for now.
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