- The Bank of Canada lowered its benchmark interest rate by 25 basis points for the second consecutive time, aiming to support a slowing economy amid rising U.S. tariff risks
- The Fed is anticipated to cut rates by another quarter point, with investors watching Chair Jerome Powell’s remarks for clues on future policy direction
- Despite economic uncertainties, markets remain upbeat, held up by expectations of continued monetary easing and strong corporate earnings
- Inflation pressures and trade disruptions pose risks, but central banks are signaling flexibility to help sustain market momentum through year-end
In a synchronized move reflecting growing concerns over economic headwinds, the Bank of Canada (BoC) and the U.S. Federal Reserve are both taking steps to ease monetary policy, aiming to support their respective economies amid trade tensions and a cooling labour market.
This article is a journalistic opinion piece which has been written based on independent research. It is intended to inform investors and should not be taken as a recommendation or financial advice.
The Bank of Canada announced its second consecutive 25-basis-point rate cut on Wednesday morning, lowering its benchmark interest rate to 2.25 per cent. The decision, was widely by economists, comes as Canada grapples with sluggish growth and rising risks from newly imposed U.S. tariffs on steel, aluminum, and automobiles.
“While the global economy has been resilient to the historic rise in US tariffs, the impact is becoming more evident,” the bank explained in a media statement. “Trade relationships are being reconfigured and ongoing trade tensions are dampening investment in many countries.”
It added that the Monetary Policy Report projects that the global economy slows from about 3¼ per cent in 2025 to about 3 per cent in 2026 and 2027.
Governor Tiff Macklem emphasized the need to “remain humble” in the face of persistent trade uncertainty, noting that the central bank’s updated forecasts reflect a cautious outlook for inflation and GDP growth.
Meanwhile, the U.S. Federal Reserve followed suit with its own 25-basis-point cut that would bring the federal funds rate down to a range of 3.75 per cent to 4.00 per cent. Chair Jerome Powell has recently acknowledged the “no risk-free path” in balancing inflation and employment goals, especially as the government shutdown continues to delay key economic data releases.
Investor sentiment remains cautiously optimistic. Despite the backdrop of trade disruptions and political gridlock, markets have rallied in anticipation of continued monetary easing. The S&P 500 and Dow Jones Industrial Average both hit record highs earlier this week, supported by expectations of lower borrowing costs and strong earnings from tech giants. Analysts suggest that as long as central banks maintain a supportive stance, equities could retain their upward momentum.
However, risks remain. The BoC’s rate cuts have sparked debate over inflation credibility, with September’s CPI rising to 2.4 per cent and core measures still hovering above 3 per cent. In the U.S., the Fed faces a similar dilemma: while inflation appears contained for now, the labour market’s softness and the potential for tariff-driven price increases could complicate future decisions.
Looking ahead, investors are hopeful that the current easing cycle will provide enough stimulus to navigate the economic turbulence. With another Fed meeting scheduled for December and the BoC set to reassess its stance before year-end, markets will be watching closely for signs of further accommodation—or a pivot toward caution.
For now, the message from central banks is clear: support growth, manage risks, and remain flexible. Whether that’s enough to sustain market momentum through the winter remains to be seen.
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