Bank of Canada Cuts Key Interest Rate to 2.25%: What it Means for Saint John Businesses

As autumn deepens in Saint John, New Brunswick, local businesses are navigating a dynamic economic landscape. With the holiday season approaching, many are keenly watching national economic indicators that directly influence local commerce. In a significant development, the Bank of Canada recently announced a reduction in its key interest rate, a move that could have ripple effects across our city’s business community.

A Welcome Rate Cut for Local Enterprises

On October 29, 2025, the Bank of Canada lowered its target for the overnight rate by 25 basis points, bringing it to 2.25%. The Bank Rate now stands at 2.5%, and the deposit rate at 2.20%. This decision, the first rate cut in some time, is a direct response to clearer effects of US trade actions on economic growth and inflation across Canada. For Saint John businesses, this could translate into more affordable borrowing costs, potentially stimulating investment, expansion, and hiring. Lower interest rates can also encourage consumer spending, providing a much-needed boost as we head into the busiest retail period of the year.

Understanding the Broader Economic Climate

The Bank of Canada’s decision comes amidst a period of adjustment for the national economy. Canada’s economy contracted by 1.6% in the second quarter of 2025, primarily due to a drop in exports and weak business investment, exacerbated by heightened uncertainty from US trade actions. Sectors such as autos, steel, aluminum, and lumber have been particularly affected.

While the global economy has shown resilience to rising US tariffs, trade relationships are being reconfigured, and ongoing tensions are dampening investment worldwide. The Bank projects global economic growth to slow from approximately 3¼% in 2025 to about 3% in 2026 and 2027. Domestically, GDP growth is expected to be weak in the latter half of this year, with a gradual recovery anticipated as exports and business investment begin to rebound.

The labour market in Canada remains soft, with employment gains in September following two months of significant losses. The unemployment rate held steady at 7.1% in September, and wage growth has slowed. Inflation, as measured by the Consumer Price Index (CPI), was 2.4% in September, with underlying inflation around 2½%. The Bank expects these inflationary pressures to ease, keeping CPI inflation near its 2% target over the projection horizon.

Looking Ahead: Insights from Governor Macklem

For those seeking deeper insights into the future of the Canadian economy, Tiff Macklem, Governor of the Bank of Canada, will participate in a fireside chat on Monday, November 3, 2025. The event, titled “State of the Canadian economy,” will take place at The Logic Summit in Toronto at 13:30 Eastern Time. While his remarks will not be published, and there will be no media availability or audience Q&A, audio and video webcasts will be available for those wishing to tune in remotely. This presents a valuable opportunity for Saint John business leaders and residents to hear directly from the Bank’s Governor on the economic outlook. You can find more details about this event on the Bank of Canada’s website.

Frequently Asked Questions

Q: How will the interest rate cut directly impact my Saint John business?

A: The 25-basis-point reduction in the overnight rate typically leads to lower borrowing costs for businesses. This can make it more affordable to secure loans for expansion, inventory, or operational needs. It may also encourage consumer spending, which can benefit local retailers and service providers.

Q: What are the main challenges facing the Canadian economy right now?

A: The Bank of Canada highlights ongoing US trade actions, which have led to a contraction in exports and weak business investment. Global trade reconfigurations and dampening investment are also significant factors. These challenges contribute to a softer labour market and slower wage growth.

Q: Where can I find more information about the Bank of Canada’s economic outlook?

A: You can visit the Bank of Canada’s official website for their Monetary Policy Reports, press releases, and upcoming event details, including the webcast of Governor Macklem’s fireside chat on November 3, 2025.