Bank of Canada reduces key interest rate - Oct 29, 2025

This morning, the Bank of Canada announced a decrease in its key interest rate by 0.25%. The prime rate has decreased from 4.70% to 4.45%. As a result, variable-rate mortgage holders will see a decrease of approximately $15.34 per month for every $100,000 of mortgage.

Now that the effects of U.S. trade actions are clearer, the Bank released new forecasts for the world and Canadian economies in its Monetary Policy Report (MPR), though uncertainty about U.S. trade policy still makes predictions less certain than usual.

The global economy has mostly handled the rise in U.S. tariffs but is now slowing down. Trade patterns are shifting, and tensions are reducing business investment. The Bank expects global growth to drop from about 3.25% in 2025 to 3% in 2026 and 2027.

In the United States, strong AI-related investment supports the economy, but job growth is slowing and tariffs are raising prices. Europe’s economy is cooling due to weaker exports and demand, while China’s investment has dropped even as exports to other countries rise. Oil prices are stable, and the Canadian dollar has slightly weakened against the U.S. dollar.

In Canada, the economy shrank 1.6% in Q2 because of weak exports and low business investment, though household spending stayed strong. U.S. trade policies have hurt industries like autos, steel, aluminum, and lumber, so growth will likely stay weak before slowly improving in 2026 as exports and investment recover.

The job market remains soft, with the unemployment rate at 7.1% in September and slower wage growth. Fewer new jobs are needed to maintain stability due to slower population growth.The Bank expects GDP to grow 1.2% in 2025, 1.1% in 2026, and 1.6% in 2027, strengthening in 2026 after a weak end to 2025.

Inflation was 2.4% in September, slightly higher than expected, while core inflation is around 2.5–3%. The Bank expects inflation to ease and stay near the 2% target in the next few years.Because the economy is weak and inflation is steady, the Bank decided to lower the policy rate to support growth while keeping prices stable. If conditions change, it’s ready to adjust again.

Canada’s economy is going through a difficult transition as trade conflicts reduce capacity and raise costs. The Bank’s priority is to maintain price stability and confidence during this period.The next interest rate decision will be on December 10, 2025.

Interest rates have dropped significantly from a year ago, and the market has changed a lot. I've been doing a lot of mortgage reviews lately and finding opportunities for clients to save thousands of dollars. If you'd like to see how much you could save, let's chat! Book an appointment with us here.