Bank of Canada Lowers Key Interest Rate to 2.25%, Signals End of Easing Cycle

The Bank of Canada has reduced its benchmark interest rate by 25 basis points, bringing it to 2.25%. The decision reflects continued weakness in Canada’s economy, with GDP contracting 1.6% in the second quarter, and inflation moving closer to the Bank’s 2% target.

Governor Tiff Macklem stated that the rate cut aims to provide modest support to households and businesses amid softening economic activity. However, he emphasized that this may mark the final cut in the current cycle, as the Bank remains cautious about reigniting inflationary pressures.

In essence, the Bank is attempting to balance two competing priorities — stabilizing economic growth while ensuring inflation remains contained. Future moves will depend on incoming data related to inflation and employment trends.