ECB Holds Rates as Bank of Canada Cuts to 2.25% on Diverging Growth Signals

Overview

• The European Central Bank left its deposit rate at 2.00%, the main refinancing rate at 2.15%, and the marginal lending rate at 2.40% for a third straight meeting after an earlier easing cycle.
• ECB officials said inflation remains near the 2% objective and reiterated a data-dependent stance, noting the Transmission Protection Instrument remains available to counter market dysfunction.
• The Bank of Canada cut its policy rate by 25 basis points to 2.25% on Oct. 29, citing continued economic weakness with inflation close to target, and indicated the move could mark a pause while staying ready to respond to new data.
• Canadian data referenced by the BoC show a 1.6% GDP contraction in Q2, a fragile labor market with 7.1% unemployment and slowing wage growth, and September inflation at 2.4% year over year.
• Officials in both jurisdictions pointed to global trade tensions, including U.S. tariff actions that have severely hit Canadian sectors such as autos, steel, aluminum, and lumber, as a key source of uncertainty for growth.