Bank of Canada Cuts Key Rate to 2.25% – Is This the End of Rate Cuts?

The Bank of Canada (BoC) cut its overnight rate by 25 basis points to 2.25% on Oct. 29, 2025 ^[1], the second straight cut in as many meetings. Governor Tiff Macklem signaled this might be the last cut for now, saying policy is “about the right level to keep inflation close to 2% while helping the economy” ^[2]. The BoC’s new forecasts show sluggish growth (only 1.2% in 2025 and 1.1% in 2026) and inflation near 2% ^[3] ^[4]. Markets rallied: the Canadian dollar firmed to about C$1.3915 per USD ^[5] and the TSX Composite hovered around 30,350 points (after a strong prior close near 30,420) ^[6]. Major Canadian banks traded higher – for example, RBC (TSX: RY) ~C$207.8 ^[7] and TD (TSX: TD) ~C$115.3 ^[8] – as lower rates lighten borrowing costs. Even telecom giant BCE was buoyed (at ~$33.4, ~5.2% yield) ^[9], since analysts note a pivot to rate cuts “could boost all high-dividend stocks” ^[10].

With markets watching global central banks, the BoC move was broadly expected but still impactful. A Reuters poll had forecast a 25 bp cut to 2.25% ^[11] ^[12]. Macklem emphasized that the cut was to offset the hit from U.S. tariffs on steel, autos and lumber, which have caused a sharp downturn. “The weakness we’re seeing in the Canadian economy is more than a cyclical downturn. It is also a structural transition,” Macklem told reporters ^[13]. In other words, Canada faces ongoing trade headwinds (with a suspended US trade talks) and a cooler labour market, so more monetary support was warranted – but not too much. The central bank noted core inflation is sticky (~3% in core measures ^[14]) and wants to avoid overshooting its 2% target, so further easing will depend on whether forecasts play out. Indeed, Macklem added flatly: “if the outlook changes, we are prepared to respond,” but hinted no immediate move is planned ^[15] ^[16].

Analysts are divided on the outlook. Many (including Avery Shenfeld of CIBC) welcomed the cut to stimulate growth: “The priority… is still to provide some economic momentum to help close the slack and bring the unemployment rate down again,” Shenfeld said after the decision ^[17]. A Reuters poll of economists similarly showed a clear majority expecting the cut, but most predict the rate will hold at 2.25% for months if inflation stays near target ^[18] ^[19]. Royal Bank’s Abbey Xu warns that any further move “into outright stimulative levels of interest rates will be more difficult with inflation still sticky above target and fiscal policy potentially ramping up” ^[20]. Conference Board’s Pedro Antunes likewise notes “core inflation is not where the bank wants it to be and the economy has not fallen off a cliff… a rate hold will help the bank retain some future firepower” ^[21]. In short, the BoC seems content to pause and reassess.

Canadian markets responded positively but cautiously. The TSX Composite index was up about 0.5% on the day, brushing record levels (around 30,350) as investors cheered the dovish tilt ^[22]. With lower policy rates, bank stocks – typically sensitive to the yield curve – ticked higher (Royal Bank ~C$207.8, TD ~C$115.3 ^[23] ^[24]). Bell Canada’s stock (BCE) has also been volatile; TS2.Tech notes that BoC moves “will indirectly affect BCE,” and that if cuts resume in 2026 it could boost dividends across the sector ^[25]. The Canadian dollar strengthened (roughly 71.9 US cents ^[26]) and bond yields rose across the curve, reflecting markets pricing in fewer cuts ahead. Globally, U.S. indices hit fresh highs (Dow +0.6%, S&P500 +0.3%) on hopes of a Fed rate cut as well, showing investors are drawing a connection between the BoC move and worldwide easing ^[27] ^[28].

Investment analysts caution that the relief may be short-lived. Citing the “persistent trade conflicts” with the U.S., the BoC’s October Monetary Policy Report starkly cut its GDP forecasts (to ~1.2% for 2025 and 1.1% for 2026) ^[29]. In prepared remarks, Macklem called U.S. protectionism “a structural transition” that has “diminished Canada’s economic prospects” ^[30]. With no sign of tariffs ending, Warren Lovely of National Bank observed on BNN Bloomberg TV that “there’s nothing to cheer about here. We’re lowering interest rates because the economy is under immense strain…The Bank of Canada might not be done” ^[31]. In other words, the central bank has lowered rates, but it remains ready to act again if trade disputes or growth disappoint. TS2.Tech agrees that Ottawa’s move is in line with global easing; as one analysis noted, “Even the Bank of Canada… is expected to cut rates soon due to a weak labor market” ^[32], underscoring that Canadian policy is not in isolation.

Forecast: The BoC’s own projections imply a long wait before any new easing. Officials say the economy is “more than a cyclical slowdown” and that policy is now roughly neutral ^[33] ^[34]. Most economists see the overnight rate stuck at 2.25% through at least early 2026, barring big shocks. Inflation is expected to hover around the 2% target ^[35]. If U.S. tariffs persist or oil prices swing, the BoC could revisit rates, but for now markets expect the next move to be on hold. As TS2.Tech notes, a future pivot to cuts (perhaps in 2026 if trade fears worsen) could lift dividend-heavy sectors ^[36] – but any easing will wait on clear evidence Canada’s economy is on firmer footing.

Sources: Bank of Canada press releases and Monetary Policy Report (Oct 29, 2025) ^[37] ^[38]; Reuters and Bloomberg coverage of Oct.29 decision ^[39] ^[40] ^[41]; market data (TSX index, RBC/TD/BCE prices) ^[42] ^[43] ^[44]; expert commentary from analysts (Lovely, Shenfeld, Xu, Antunes) ^[45] ^[46] ^[47] ^[48]; TS2.Tech analysis ^[49] ^[50].

How Will Higher Interest Rates Impact the Economy? | Mark Hamrick - Bankrate.com

Watch this video on YouTube.

References

Tags:

Mateusz Kaczmarek Latest posts

A technology and finance expert writing for TS2.tech. He analyzes developments in satellites, telecommunications, and artificial intelligence, with a focus on their impact on global markets. Author of industry reports and market commentary, often cited in tech and business media. Passionate about innovation and the digital economy.

View all

Asia markets mixed as investors await Fed decision and Trump-Xi talks
October 30, 2025, 7:06 AM EDT. U.S. stocks extended record highs on Tuesday, with the S&P 500 up 0.2%, the Dow Jones Industrial Average rising about 161 points (0.3%), and the Nasdaq composite up around 0.8%. The market paused for bond-side modest moves as investors wait for the Federal Reserve to announce its next rate move and for a wave of quarterly results. Standouts included UPS (+8%) on stronger profit and holiday revenue guidance, and PayPal (+3.9%) after a bigger summer profit, a quarterly dividend plan, and a deal integrating OpenAI's ChatGPT payments. With Trump meeting Xi Jinping looming, traders eye how the talks may ease U.S.-China tensions amid earnings season.
MercadoLibre Q3 Preview: Credit Growth and Argentina Headwinds
October 30, 2025, 7:02 AM EDT. MercadoLibre (MELI) is set to report Q3 results after the bell, with investors focused on how fast its credit portfolio expands and whether margins can withstand rising logistics costs amid Argentina headwinds. Analysts expect EPS around $9.16 and revenue near $7.2 billion, with the stock up about 33% this year on optimism for continued GMV growth across e-commerce, fintech, and advertising. Key questions: can revenue growth translate into stronger profitability, will management maintain disciplined capital allocation, and is there evidence of margin recovery? Traders will also watch Brazil and Mexico for e-commerce momentum, the trajectory of credit and payments, and how peso devaluation could pressure demand and reported results.
Teleflex (TFX) Not Lagging on Growth or Pricing: High P/E Backed by Strong Forecasts
October 30, 2025, 7:00 AM EDT. Teleflex's P/E of 29.5x stands out vs. the US market, but a deeper look is warranted. The stock has shown earnings declines-profits fell 26% last year and EPS is down 60% over three years-yet analysts expect growth to accelerate, with EPS forecast to rise about 45% per year for the next three years, well above the ~11% market growth. This growth outlook helps justify the elevated multiple, as investors price in a potential rebound. Two warning signs exist, suggesting risk remains despite the optimistic view. If earnings fail to materialize, the high P/E could weigh on the share price. In sum, a high P/E reflects expected earnings acceleration, but downside risks require caution.
FinVolution Group (FINV) Slumps 25% as Low P/E Signals Cautious Outlook
October 30, 2025, 6:58 AM EDT. FinVolution Group (NYSE: FINV) has slid 25% in the last 30 days, with a 1-year drop of about 6.2%. The stock's P/E ratio of 3.6x stands out versus a US market where many names trade well above 19x. A low P/E can indicate value or a justified caution; in this case, analysts see limited upside, even as EPS has risen recently. Over the past year, earnings grew about 35%, and three-year EPS rose roughly 31%, aided by solid near-term momentum. Looking ahead, seven analysts expect EPS to grow ~8.5% annually over the next three years, versus ~11% for the broader market. The low P/E thus reflects tempered growth expectations rather than a one-off stumble.
Steel Dynamics (STLD) Trades Above 12-Month Target at $111.26
October 30, 2025, 6:56 AM EDT. Steel Dynamics Inc. (STLD) edged higher, trading at $111.26 after crossing the average 12-month target of $110.89. The move flags potential analyst re-pricing: some may raise targets if fundamentals look solid, while others could adjust on valuation. Zacks' coverage shows 9 targets with a low of $95.00 and a high of $130.00; the dispersion is $11.307. The current mix is 2 Strong Buy, 0 Buy, 7 Hold, 1 Strong Sell, yielding an average rating of 2.8 on the 1-5 scale. With price just above the target, investors should decide whether $110.89 is a steppingstone to a higher target or a peak worth trimming. Source: Zacks via Quandl.

Bank of Canada Cuts Key Rate to 2.25% – Is This the End of Rate Cuts?

References

Tags:

Stock Market Today