Bank of Canada cuts key interest rate to 2.5% as U.S. tariff risks shift

By Canadian Press on September 17, 2025.

OTTAWA — The Bank of Canada cut its benchmark interest rate by a quarter point today as the central bank worries less about inflation risks and more about a slowing economy.

The Bank of Canada’s policy rate now stands at 2.5 per cent, which breaks a streak of three consecutive holds since March.

Governor Tiff Macklem says risks have shifted since the central bank’s last rate decision in July and policymakers felt it was the right time to shore up the economy against U.S. trade disruption.

He says the pressure the Bank of Canada saw in underlying inflation has diminished in recent months while the labour market has softened and Canadian exports have fallen sharply.

Macklem also says the federal government’s decision to drop most retaliatory tariffs against the United States at the start of this month will take some fuel out of inflation.

Uncertainty tied to U.S. tariffs has come down a little in the Bank of Canada’s view, but policymakers signalled they’ll still be watching how trade impacts affect prices and economic growth as the central bank weighs future rate decisions.

This report by The Canadian Press was first published Sept. 17, 2025.

Craig Lord, The Canadian Press