The Bank of Canada is expected to announce another rate cut this week, potentially providing short-term relief for Canadian households struggling with high borrowing costs. However, economists caution that while a Bank of Canada rate cut could ease mortgage and loan payments, it is unlikely to have an immediate impact on food inflation, which remains persistently high across the country.
Bank of Canada Rate Cut: What to Expect
According to financial analysts, the Bank of Canada (BoC) is likely to reduce its overnight benchmark interest rate by 25 basis points on October 29, 2025 — the second cut since March. The move would lower borrowing costs for consumers with variable-rate mortgages, auto loans, and personal credit lines, allowing households to redirect some spending toward essentials such as groceries and utilities.
“The cut will give Canadians a bit of breathing room,” said Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University. “Many families are extremely cautious with spending right now. A rate cut can help them show up at the grocery store with a little more money in their pockets.”
Despite this, Charlebois and other experts warn that the Bank of Canada rate cut will not directly influence food prices, which are largely driven by supply shortages and global commodity disruptions.
Why Food Prices Remain High Despite Lower Rates
Recent data from Statistics Canada shows that food inflation accelerated to 4% in September 2025, up from 3.5% in August, even as the country’s overall inflation rate cooled to 2.4%.
According to Andrew Hencic, senior economist at TD Bank, “There’s not much the Bank of Canada can do about food inflation because it’s driven by supply issues in key markets.” Products such as beef and coffee have seen double-digit price increases due to global shortages, rancher sell-offs, and extreme weather events impacting production.
For example, beef prices rose 5% year-over-year in September, and economists don’t expect a decline before mid-2027 due to limited cattle inventory. Coffee and cocoa prices have also surged due to poor harvests abroad, further straining household budgets.
Broader Economic Effects of the BoC Rate Announcement
While the Canada interest rate reduction may not immediately lower grocery prices, it can stimulate broader economic activity. Lower borrowing costs can encourage businesses to invest and hire, potentially easing unemployment and boosting consumer confidence.
“The BoC rate announcement could prompt companies to restart investments they’ve been delaying,” Charlebois added. “With trade uncertainty in the U.S. slowing business activity, rate cuts can motivate firms to re-engage with the market.”
However, the impact may take months to materialize. Experts emphasize that monetary policy works with a lag, and its effects on the economy depend on how banks and consumers respond to lower rates.
Can Rate Cuts Control Inflation in Canada?
The Bank of Canada’s primary goal remains price stability, but its tools have limits. Interest rate cuts can ease debt burdens and support growth, but they can also reignite inflation if demand increases too quickly.
With the Canada inflation rate still above the 2% target, the central bank faces a delicate balancing act — stimulating growth without allowing prices to spiral again.
Hencic noted, “This rate cut will help on the margin, but it’s not a silver bullet. Supply constraints in food and energy markets are outside the central bank’s control.”
Outlook: A Temporary Relief, Not a Solution
For now, the Bank of Canada rate cut offers cautious optimism for Canadians grappling with high living costs. Homeowners and borrowers may benefit from slightly lower payments, while the broader economy could see a small uptick in activity.
But for consumers facing rising grocery bills, the relief may feel distant. As experts agree, the fight against food inflation will require more than just monetary adjustments — it will depend on improving supply chains, stable commodity production, and favorable weather conditions globally.
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