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Bank of Canada cuts rate to 2.5%, first easing since March
The Bank of Canada cut its policy rate by 25 basis points to 2.5% on Wednesday, ending a six-month hold; the statement struck a notably dovish tone, acknowledging a weakening economy and job losses, with variable-rate mortgages set to follow immediately.
Why it matters
The Bank of Canada cut its policy rate by 25 basis points to 2.5% on Wednesday, October 7 — its first easing since March, ending a six-month hold driven by tariff and inflation concerns. The Financial Post's Friday edition reported a notably dovish shift in language: the global economy went from "resilient" to "slowing," and the U.S. labour market from "solid" to "slowed."
The case for the cut
The bank pointed to the contraction in Canada's real GDP, recent job losses and softening hiring plans, which, along with a more challenging demographic profile, will weigh on household spending. On inflation, July–August readings had eased, and Ottawa's recent decision to lift most retaliatory tariffs on U.S. imports should reduce upward price pressure. The bank's confidence that inflation is back on a downward path has substantially increased.
Market reaction
The lower rate will be immediately reflected in variable-rate mortgages, while fixed-rate mortgages follow the bond market. The S&P/TSX Composite edged down 86 points (0.25%) to 30,333.48. BMO chief economist Robert Kavcic said ongoing labour-market softness leaves the door open for another cut in early 2026; CIBC's Andrew Grantham said that if the economy gradually recovers and trade talks lower some tariffs, this move would likely be the final one.
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