Canada Monetary Policy Research Brief

BoC cuts rate as expected in September. In line with market expectations, the Bank of Canada lowered the overnight rate by 25 basis points at its September policy meeting, bringing it to 2.5 per cent. Since its July meeting, Canada’s labour market has weakened. A loss of nearly 110,000 jobs between July and August pushed the unemployment rate up to 7.1 per cent. On the price front, despite some mixed signals, recent inflation data suggest that upwards price pressures have eased, even with higher costs from trade disruptions. Additionally, the risk of future inflation has diminished, as Canada has removed most of its retaliatory tariffs on U.S. goods. Together, these three developments have shifted the balance of risks, prompting the BoC to resume rate cuts since its March policy move.