Sunday, October 5, 2025

Where Canada’s Interest Rates Stand Now (October 2025)

Date:

After a year of speculation, the Bank of Canada finally began cutting. The policy rate now sits at 2.50% after September’s 25‑basis‑point trim — the first cut in 2025. Inflation is easing, but not dead. The next move? Probably another cut before the year ends.

The Current Picture

  • BoC policy rate: 2.50% (as of September 17, 2025)
  • Inflation: 1.9% headline (August 2025), with core/trimmed measures hovering around 3.0%
  • Next decision: October 29, 2025 (MPR release)

The cut was the BoC’s response to a slowing economy, softer housing data, and inflation drifting closer to its 2% target. But Governor Tiff Macklem stressed that the bank is still cautious — a sudden series of cuts could reignite demand just as price pressures settle.

Market Reaction

Bond yields dipped fast. The 5‑year Government of Canada yield fell under 2.7%, sending mortgage rates lower across the board. Variable‑rate borrowers finally got some relief, while fixed‑rate buyers are seeing sub‑4.5% offers again.

TSX investors liked it — banks and REITs both caught a bid. But the loonie? Not so much. CAD/USD dropped toward 0.71, reflecting traders betting on further easing.

The Bigger Picture

TD Economics and RSM both expect two more cuts by year‑end, taking the overnight rate to roughly 2.25%. That would bring policy back into a “neutral” zone for the first time since 2022.

Still, inflation isn’t gone. Gas prices and food remain sticky, and core metrics are holding near 3%. The BoC’s job isn’t over — but the trend is clearly toward gentler policy.

Why It Matters for Canadians

  • Mortgage renewals: Renewing borrowers could finally see a rate starting with a 4 again, not a 6.
  • Investors: Real‑return bonds and dividend stocks look better with falling yields.
  • Savers: GICs and HISA rates are slowly ticking down, so now might be the last chance to lock in high returns.

Bottom Line

The BoC’s first cut in over a year signals that the tightening cycle is officially done. Rates are still above pre‑pandemic lows, but momentum has flipped. For borrowers, relief is finally in sight — and the next BoC meeting could push it even further.

+ posts

Marc has been involved in the Stock Market Media Industry for the last +5 years. After obtaining a college degree in engineering in France, he moved to Canada, where he created Money,eh?, a personal finance website.

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