Five key takeaways from the Bank of Canada’s rate cut decision

Bank of Canada Governor Senior Deputy Governor Carolyn Rogers looks on as Tiff Macklem responds to a question during a news conference in Ottawa, Wednesday, Sept. 17, 2025. Photo by Adrian Wyld /The Canadian Press

Article content

The Bank of Canada cut its benchmark interest rate by a quarter point on Wednesday, bringing it to 2.5 per cent after three straight holds.

Article content

Governor Tiff Macklem said the central bank has shifted to worrying more about a slowing economy than high inflation.

Article content

Article content

Here’s what we learned about the economy, inflation and more from the central bank’s decision and press conference Wednesday.

Article content

Article content

Recession unlikely

Article content

Article content

The bank has been cagey with economic outlooks this year because of the greater-than-usual uncertainty on trade, instead putting forth multiple scenarios to illustrate where things might be headed.

Article content

But Macklem said Wednesday it doesn’t look like a recession is in the cards this year, even after the economy contracted in the second quarter.

Article content

“We are expecting growth somewhere around one per cent in the second half of the year,” Macklem said.

Article content

“It’s not going to feel good. It is growth, but it’s slow growth because … the Canadian economy is adjusting to a different relationship with its biggest trading partner.”

Article content

Trade uncertainty remains

Article content

Macklem said near-term uncertainty may have “come down a little” as U.S. tariffs showed signs of stability in recent months and businesses appear to have adapted.

Article content

But the focus has now shifted to the Canada-United States-Mexico Agreement, or CUSMA, which is up for review next year.

Article content

“Tariffs are weakening the Canadian economy,” Macklem said, which has “acutely” impacted industries directly linked to trade, such as transportation.

Article content

Article content

Macklem said businesses are also facing a host of new costs related to trade disruptions as they switch to new suppliers and develop new markets.

Article content

“That all entails cost, and when you step back, the reality is tariffs are increasing trade friction with our biggest trading partner,” he said.

Article content

“That has efficiency costs.”

Article content

Macklem explained that monetary policy alone can’t undo the effects of tariffs, particularly ones targeted to specific industries such as metals and the auto sector.

Article content

Inflation trending in the right direction

Article content

Concerns over inflation from earlier this year have started to dissipate, Macklem said.

Article content

That’s true even after Statistics Canada reported Tuesday that the annual inflation rate in August rose to 1.9 per cent.

Article content

The central bank looks at a wide range of inflation measures since price stability is its core mandate. A closer look at the numbers suggest inflation is easing even after the August increase.

Article content

“If you look under the hood though, what you can see is that earlier in the year we saw some upward momentum in those core measures. If you look at the more recent monthly readings on the core measures, that momentum has come off,” Macklem said.