On September 17, 2025, the Bank of Canada cut its target for the overnight rate by 0.25 percentage points to 2.5%, with the Bank Rate at 2.75% and the deposit rate at 2.45%. It was the first move after three holds.
Bank of Canada policy rate, %
What the Bank said
- GDP declined about 1.5% in the second quarter. Exports fell 27% after the first-quarter rush ahead of tariffs.
- Consumption and housing activity both grew at a healthy pace.
- Employment fell in the past two months, and unemployment rose to 7.1% in August.
- CPI inflation was 1.9% in August; excluding taxes, it was 2.4%.
- With a weaker economy and less upside risk to inflation, a cut was judged appropriate.
What it means for Calgary
Lower variable rates and slightly cheaper fixed rates arrive just as Calgary buyers have the most choice in years, with 3.4 months of supply in August. That combination could support fall sales, especially for detached homes. The next decision is on October 29, 2025.
Compared with July
In July, the Bank held at 2.75% while it waited to see how tariffs would play out. By September, its concerns had shifted toward a weaker economy. The second-quarter decline in GDP of about 1.5% came in as expected, but employment had fallen in the two months since the July report, mostly in trade-sensitive sectors, and hiring elsewhere had slowed. Unemployment rose from 6.9% in June to 7.1% in August. CPI inflation stayed at 1.9%, and inflation excluding taxes eased from 2.5% in June to 2.4% in August.
Canadian unemployment rate, %
Why the Bank cut
The Bank said preferred core inflation measures have been around 3% in recent months, but the upward momentum seen earlier in the year has dissipated, and a broader range of indicators suggests underlying inflation is running around 2.5%. The federal government’s decision to remove most retaliatory tariffs on US goods also means less upward pressure on prices. With a weaker economy and less upside risk to inflation, the Bank judged a cut appropriate to better balance the risks.
What the Bank expects
Slow population growth and a weak labour market will likely weigh on household spending in the months ahead. Business investment declined in the second quarter. Financial conditions have eased, with higher equity prices and lower bond yields, and oil prices are close to the levels assumed in July.
What it means for Calgary buyers
Lower bond yields and a lower policy rate together help both variable and fixed mortgage costs. For a Calgary buyer, the cut improves affordability at a time when sellers face 3.4 months of supply, so buyers gain on both price and payment. Get a fresh pre-approval to see how much the cut changes your budget.
What it means for sellers and owners
A cut may draw some buyers back into the market this fall, but with inventory high, sellers should not expect a quick return to bidding wars. Owners with variable-rate mortgages will see lower interest costs; those renewing soon can compare offers.
Local angle
Calgary’s job market and oil prices remain the key local factors to watch. The next decision is on October 29, 2025, along with a new Monetary Policy Report.
The global picture
The Bank said global growth is showing signs of slowing after staying resilient to sharply higher US tariffs. In the United States, business investment has been strong but consumers are cautious, job gains have slowed and inflation has picked up as businesses pass on some tariff costs. Growth in the euro area has moderated, and China’s growth appears to be softening as investment weakens. Canada’s exchange rate has been stable against the US dollar. The Bank will keep watching how exports evolve, how that spills over into investment, jobs and spending, and how trade disruptions feed into consumer prices.
