Good morning. The Bank of Canada’s signal that monetary policy has reached its limits is bringing new urgency to the federal government’s long-anticipated budget next week. More on that below, along with the unlikely Blue Jays fanbase building across the border. (But can you blame them? One more win!)
Up firstIn the news
Mining: Institutional investors are campaigning to keep Teck Resources Ltd. listed in domestic stock market benchmarks after the miner completes its proposed merger with London-based Anglo American PLC.
Investing: The recent expiry of a U.S. patent that was held for decades by investment giant Vanguard Group is threatening to upend the growth of Canada’s $650-billion exchange-traded fund industry.
Energy: The group proposing a massive carbon capture project in Alberta’s oil sands has begun preliminary discussions with Ottawa’s new Major Projects Office.
Donald Trump raises a glass to Mark Carney at a dinner in South Korea.Adrian Wyld/The Canadian Press
To us?
The seating planners at this South Korean dinner either don’t follow the news or follow it extremely closely with comedic intent.
Donald Trump played down the chances of a meeting with Prime Minister Mark Carney at a summit there this week after he broke off trade talks with Canada and threatened to raise tariffs on Canadian imports by 10 per cent. But the U.S. President ended up sitting across from Carney at a small, eight-seat event last night hosted by South Korean President Lee Jae Myung. Steven Chase reports from Gyeongju, South Korea.
In focusPassing the puck to Parliament
Moving a lending rate up or down can only do so much. In explaining its decision to cut interest rates yesterday, the Bank of Canada underscored the limits of what monetary policy can do to shape a recovery slowed by trade shocks and weak business investment. Its decisions alone “cannot offset the long-term implications of U.S. tariffs or other sources of structural change,” the bank said in its report. “The primary focus of monetary policy is to maintain low and stable inflation.” The benchmark rate now stands at 2.25 per cent, down another 25 basis points.
“Monetary policy … can’t target the hard-hit sectors, aluminum, steel, and autos,” Bank of Canada Governor Tiff Macklem told reporters in Ottawa. “It can’t help companies find new markets. It can’t help companies reconfigure their supply chains.”
The announcement shifts attention to Ottawa, where the federal government will outline its fiscal response in next week’s budget. Economists expect the plan to deliver the largest deficit in years – making it unlikely the Liberals will meet their campaign pledge to shrink the debt relative to the size of the economy.
Over to you
The bank’s outlook implicitly leans on fiscal policy to carry more of the weight, signalling “more explicitly than we thought” that it is unlikely to cut rates again, RBC economist Nathan Janzen said. “A big factor in not having a worse economic outcome as a base case is that fiscal policy will step up to help address targeted trade weakness and some of these structural growth challenges.”
In the budget, markers watchers will be looking at whether projected spending charts a clear path to real, achievable results — on all the stuff the bank can’t address with monetary policy. “The challenge is always turning those projected deficits and government spending into actual projects,” Janzen said in an interview. “That’s what will be watched – how much of the spending is on infrastructure, and how clear they are about the potential projects and timing of getting shovels into the ground.”
More planning around ports, for example, would make sense because it would support the work of diversifying trade opportunities away from the U.S. But many projects on that level haven’t made it much further than a to-do list.
Prime Minister Mark Carney has announced at least the outlines of the government’s flagship priorities: a Major Projects Office to speed infrastructure approvals, a housing agency to expand construction capacity, and a pledge to lift defence and security-related spending to 5 per cent of GDP by 2035 – roughly $150-billion a year once fully implemented.
Markets are as concerned with the quality of Ottawa’s spending as with the speed of its delivery. Fiscal measures, like interest-rate cuts, take months to roll through the economy. Deficits in the range of 2 to 3 per cent of GDP – among the largest in recent years – would still give the economy a meaningful boost once the money begins to flow, Janzen said.
“The risks, as they always are, are around implementation,” he said.
A different course
The Bank of Canada’s latest rate cut could be the last of an easing cycle that began in May, 2024 – when it trimmed borrowing costs for the first time in more than four years after a historic run of hikes. The policy rate has dropped to 2.25 per cent from 5 per cent over that period, a descent that began as inflation cooled and housing demand showed signs of turning around.
That trajectory was nudged off course when U.S. President Donald Trump imposed tariffs on Canadian metals, autos and other goods to bolster U.S. manufacturing. While many exports remain exempt under the trade agreement, those levies – together with weak investment and slowing productivity – have dampened growth. Even with another cut, a cloudy outlook is expected to keep potential homebuyers on the sidelines in Canada’s largest real estate markets.
In its new outlook, the bank projects GDP to rise only 1.4 per cent annually through 2027, well below earlier expectations. It said monetary policy can cushion short-term slowdowns but “cannot offset” the uncertainties and geopolitical gyrations now reshaping the economy.
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Jays watchA budding cross-border bandwagonOpen this photo in gallery:
Bob Reaume, owner of Bob Reaume Sports in Windsor, Ont., holds a new Toronto Blue Jays World Series ball cap with a new American League Champions t-shirt,, Tuesday, Oct. 28, 2025.Dax Melmer/The Globe and Mail
In Windsor, Ont., U.S. tariffs and talk of annexation have turned long-time Detroit Tigers fans toward an unlikely refuge – the Toronto Blue Jays.
Up nextAlso on our radar
At the bell: Earnings we’re following include Canadian Natural Resources and Restaurant Brands, the parent company of Tim Hortons. Imperial Oil, Cenovus and Magna are up tomorrow. You can find our full calendar of events and earnings here.
On the morrow: Canada reports gross domestic product for August. Economists aren’t expecting much.
The measure of metal: Prices of copper, considered a bellwether for the global economy, have risen more than 27 per cent so far this year. Analysts are warning that a fresh high could forebode a fall.
Morning update
Global markets were lower after U.S. President Donald Trump said he had made a deal with Chinese President Xi Jinping on rare earths and tariffs.
Wall Street futures were in negative territory ahead of more Big Tech earnings, while TSX futures were flat.
Overseas, the pan-European STOXX 600 was down 0.42 per cent in morning trading. Britain’s FTSE 100 fell 0.37 per cent, Germany’s DAX declined 0.14 per cent and France’s CAC 40 dropped 0.58 per cent.
In Asia, Japan’s Nikkei closed 0.03 per cent higher, while Hong Kong’s Hang Seng declined 0.24 per cent.
The Canadian dollar traded at 71.68 U.S. cents.