Saturday, July 12, 2025

Who Controls Rate Cuts in Canada — And Why It Matters in 2025

Date:

As Canadians watch mortgage costs, grocery prices, and gas station totals with increasing scrutiny, a central question keeps popping up: who decides whether interest rates go down? The answer lies with one institution — and one man in particular.

The Bank of Canada: The Powerhouse Behind the Rates

In Canada, all decisions about interest rates — including cuts — are made by the Bank of Canada (BoC), the country’s central bank. More specifically, it’s the Governing Council of the Bank of Canada that meets eight times a year to decide whether to raise, lower, or hold the overnight interest rate, which directly influences consumer and business borrowing costs.

The rate decisions are based on a wide range of economic data, including:

  • Inflation trends
  • Unemployment rates
  • Wage growth
  • Consumer spending
  • Global economic conditions

By adjusting the rate, the BoC aims to meet its primary mandate: keeping inflation close to its 2% target, while also supporting stable economic growth and a healthy financial system.

Tiff Macklem: The Man Behind the Monetary Curtain

As of 2025, the Bank of Canada is headed by Governor Tiff Macklem, who was appointed in 2020 to a seven-year term. That means he’s scheduled to serve until 2027, barring any early resignation or political shift.

Macklem, a former senior deputy governor and dean at the University of Toronto’s Rotman School of Management, has steered Canada through one of its most turbulent economic stretches — from the COVID-19 recovery to the post-pandemic inflation surge.

Under his leadership, the BoC aggressively raised rates in 2022–2023 to combat inflation, pushing the policy rate as high as 5.0%. As inflation cooled through 2024 and into 2025, the bank began cutting rates cautiously, bringing it down to 2.75% as of April 2025.

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Why Rate Cuts Matter to You

When the Bank of Canada cuts its policy rate, it reduces the cost of borrowing across the board. That includes:

  • Mortgage rates (especially variable rates)
  • Credit card and line-of-credit interest
  • Business loan rates

For average Canadians, lower rates can mean smaller monthly payments and improved access to capital — a critical boost in a time of economic slowdown or uncertainty.

However, if the BoC cuts too fast or too far, it risks reigniting inflation — a scenario no one wants to revisit after the rollercoaster of 2022–2023.

What’s Next?

Tiff Macklem and the Governing Council are expected to remain cautious in 2025. Despite recent rate cuts, the BoC’s latest statements suggest that they are in “wait and see” mode, closely watching global supply chains, U.S. tariff moves, and domestic wage trends.

According to the BoC’s most recent Monetary Policy Report, further cuts are possible in late 2025 — but only if inflation continues to track below 2.5% and consumer demand remains soft.

Final Word

So next time someone complains about their mortgage payment or line of credit, you can point to the 234 Wellington Street address in Ottawa — and to the decisions being made there by Tiff Macklem and his team.

Rate cuts don’t come from politicians or parliament. They come from economists, data models, and cautious debate inside Canada’s central bank — all aimed at steering the economy through both storms and sunshine.

+ 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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