The Bank of Canada (BoC) delivered another quarter-point rate cut this week, lowering its key interest rate to 2.25%. But while the move offers some relief for borrowers, the central bank signaled that this could be the last cut for a while.

A Balancing Act Between Growth and Inflation

The BoC’s decision comes as Canada’s economy continues to struggle with weak growth and soft business investment.
Economic output fell 1.6% in the second quarter, and indicators suggest that momentum remains sluggish heading into year-end.

At the same time, inflation has cooled, sitting around 2.4% — right in line with the Bank’s target range. That combination of low inflation and slow growth gave policymakers room to cut rates again, but the tone of Wednesday’s announcement suggests that the BoC now believes monetary policy is “about right.”

In short: the Bank may now pause to see how previous rate cuts ripple through the economy.

What the BoC Said

Governor Tiff Macklem acknowledged that the global backdrop remains uncertain, citing ongoing trade tensions and supply chain realignments as key headwinds for Canadian exports.
Still, the Bank emphasized that the current rate level should be enough to support the economy without reigniting inflation.

“With inflation near target and growth expected to stay modest, the policy rate is now appropriately positioned,” the statement read.

Market Reaction

The reaction was swift:

• The Canadian dollar strengthened to a one-month high against the U.S. dollar as traders interpreted the BoC’s tone as more cautious about future cuts.
• Bond yields ticked higher, as investors scaled back expectations for additional rate reductions this year.

Despite the market adjustment, the rate cut is still welcome news for mortgage holders and borrowers who’ve been struggling with elevated interest costs.

What It Means for Canadians

If you have a variable-rate mortgage or line of credit, your borrowing costs may drop slightly over the coming weeks.
However, anyone hoping for a series of deep rate cuts might need to temper expectations — the BoC has hinted that this could be the final cut in the current cycle unless the economy weakens further.

For savers and investors, the message is one of stability rather than stimulus: interest rates are likely to stay near current levels for some time as the Bank aims to balance growth and inflation risks.

Looking Ahead

The BoC projects economic growth of about 1.2% in 2025 and 1.1% in 2026, with inflation expected to hover close to the 2% target. That means the next big move could just as easily be a pause — or even a future hike — depending on how the economy evolves.

For now, the key takeaway is clear:
Borrowing costs are easing, but the rate-cutting cycle may be nearing its end.