TORONTO – The head of the Bank of Canada says he thinks interest rates are at the lower end of where they can go as he tries to balance boosting the tariff-hit economy and keeping inflation in check.
Speaking at a conference in Toronto, Governor Tiff Macklem says tariffs are a slower-moving pressure than some crises, but that they are likely to put pressure on prices over time.
The inflation risk means that while Canada’s economy could use the boost of lower interest rates, he’s limited in how much further he could push them down.
The Bank of Canada lowered its benchmark interest rate by a quarter percentage point to 2.25 per cent last Wednesday.
Macklem says the rate is now at the low end of the central bank’s neutral range, meaning it provides some stimulus while keeping inflation well controlled.
He says the country needs to work on long-standing productivity issues to raise incomes enough to make up for the recent bout of elevated inflation, but that tariffs are also making that harder.
Based on current conditions though, lower interest rates don’t seem to be the answer, he said.
“We think monetary policy is in about the right place to provide some support, while keeping inflation well controlled,” he said.
“Our priority is to make sure that the tariff problem doesn’t become an inflation problem.”
He made sure not to offer any policy recommendations that he would like to see in Tuesday’s federal budget, but broadly talked of the need to reduce internal trade barriers and boost transportation corridors as part of lowering the cost of business.
“If there’s more income, things become more affordable, but that is going to take some hard decisions.”
This report by The Canadian Press was first published Nov. 3, 2025.
