The Bank of Canada lowered interest rates to 2.25 per cent on Wednesday, but cautioned that monetary policy can’t fix the structural economic damage caused by the U.S. trade war.

The central bank said it made the 25-basis-point cut as weakness ripples through the Canadian economy and with inflation expected to stay close to the bank’s two per cent target.

“For many months, we have been stressing that monetary policy cannot undo the damage caused by tariffs,” said Bank of Canada governor Tiff Macklem during a news conference in Ottawa.

Real gross domestic product declined 0.3 per cent in August and early signs suggest the economy barely managed any growth in the third quarter, Statistics Canada said Friday.

Goods-producing industries were down in August for the fifth time this year while the services side contracted for the first time in six months, StatCan said.

The agency said August’s decline mostly offsets a gain of 0.3 per cent in real GDP for July, which was revised a tick higher from earlier estimates. StatCan had initially expected flat growth for August in its advance estimate.

The agency said a work stoppage among Air Canada flight attendants hampered air transportation activity in August. That subsector was down 4.6 per cent in the month, marking its steepest decline since the COVID-19 pandemic.Drought conditions constrained hydroelectric power generation in the month, the agency said, throttling overall output from the utilities sector.

The wholesale trade industry and the mining and quarrying subsectors also posted declines, partially offset by growth in retail trade.

The tariff-sensitive manufacturing industry posted a decline of 0.5 per cent in August, but an early look at September’s real GDP figures show the sector might have rebounded last month.

Canada’s banks aren’t worried about mortgage arrears—but should they be? The arrears rate climbed again in August, according to the Canadian Bankers Association (CBA), which represents the country’s largest lenders. Investors have brushed off the rise as a return to normal after record lows. What they may not realize is that the late 1980s also saw a record low—followed by a long, painful climb. This time, it’s rising even faster.  

OTTAWA — The Canadian Real Estate Association has upgraded its forecast for home sales in 2025, saying it now expects a softer decline this year as activity continues to rebound.

It comes as September home sales rose 5.2 per cent from a year ago, marking the most activity for the month since 2021.

There were 39,700 home sales across the country last month, up from 37,721 in September 2024.

The uptick is unsurprising, said Brendon Cowans, a sales representative for Toronto-based brokerage Property.ca, who said September’s interest rate cut has led to improved sentiment.

“I’m seeing slightly more activity, bidding wars are coming back in certain segments,” Cowans said.

Interest rate cuts may have improved market sentiment, but prices are still high

While the Greater Toronto Area’s fall housing market started slower than expected, signs of life emerged in some pockets of the GTA where more single-family homes were selling over asking.

According to Wahi’s latest analysis of overbidding and underbidding trends in the GTA in September, 8% of GTA neighbourhoods where at least five homes sold were in overbidding territory, up from just 1% in August.

Bank of Canada governor Tiff Macklem said he sees the Canadian labour market as “soft” despite recent data that showed the country added 60,400 jobs in September.

In a callback to media from Washington, where he was attending meetings of the International Monetary Fund and World Bank, Macklem noted the employment gain last month only partially reversed a job loss of more than 100,000 positions the previous two months, and called the data “volatile.”