The Canadian Dollar (CAD) trades under pressure against the US Dollar (USD) on Wednesday as markets digest the latest interest rate decision from the Bank of Canada (BoC). At the time of writing, USD/CAD is trading around 1.3861, with traders now turning their attention to the Federal Reserve’s (Fed) monetary policy announcement due later at 19:00 GMT.
The BoC kept its overnight rate unchanged at 2.25%, in line with market expectations, and maintained a steady tone in its policy statement. The central bank noted that while global conditions remain uncertain, Canada’s economy expanded by a stronger-than-expected 2.6% in the third quarter, driven mainly by volatile trade flows rather than stronger domestic demand.
The BoC now expects Gross Domestic Product (GDP) to soften in the fourth quarter before picking up in 2026. Inflation remains close to target, with headline CPI at 2.2% and core measures holding between 2.5% and 3%. Given this backdrop, the Governing Council reaffirmed that the current rate is “about the right level” to manage inflation risks and guide the economy through broader structural adjustments linked to global trade frictions.
Governor Tiff Macklem’s opening comments ahead of the press conference reinforced the Bank’s cautious stance. He acknowledged the economic drag from steep US tariffs but emphasized that the Canadian economy has shown resilience. Macklem also noted that inflation pressures remain contained and that keeping the policy rate at the lower end of the neutral range is appropriate for now.
In the United States, the Fed is poised to deliver another 25 basis point (bps) rate cut, which would bring the Federal Funds Rate down to the 3.50%-3.75% range. Attention will be squarely on Fed Chair Jerome Powell’s post-meeting press conference, along with the updated dot plot and economic projections.
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