What has changed in 2025?

What has changed in 2025?

An overview of the key events that might have affected your finances over the past year.

November 12th, 2025

The past year has been a very eventful one for the economic world, to the point that it can be hard to keep track. Here are a few milestones.

A game-changing U.S. administration 

The highlight of 2025 remains the inauguration of a new administration in the United States and the immediate unleashing of a trade war. Political decision-makers, investors and businesses have had a new climate to contend with, especially given the unpredictability of measures often announced by executive order. The current U.S. president has issued more executive orders in ten months than his predecessor did in four years. The long-term impact of the resulting uncertainty is hard to gauge.

Comparative table entitled Number of executive orders as at August 20. The table lists a number of recent U.S. presidents and gives the total number of executive orders signed by each one, along with the annual average. Ronald Reagan: 381 orders, average of 48 per year. George H. Bush: 166 orders, average of 42 per year. Bill Clinton: 364 orders, average of 46 per year. George W. Bush: 291 orders, average of 36 per year. Barack Obama: 276 orders, average of 35 per year. Donald Trump, first term: 220 orders, average of 55 per year. Joseph Biden: 162 orders, average of 41 per year. Donald Trump, second term: 198 orders so far, with an annualized average of 329. This figure is marked with a blue circle. The data source is The American Presidency Project.

In spite of everything, the markets were resilient

Given the context, the stock markets performed well. At the end of October, Canada’s S&P/TSX index was up by 22.37% while in the U.S. the S&P 500 index posted an increase of 16.30%. There was also some turbulence, though, especially in the first week of April, when the S&P 500 alone dropped by about 13%.

Graph entitled Performance of the S&P/TSX index in 2025, as at October 31. The horizontal axis represents the months from January to November, and the vertical axis shows the level of the index from 17,500 to 32,500 points. The curve starts in January at about 25,000 points. It climbs slightly in February, then gradually declines in March. In April, there’s a sharp drop, with the index falling below 22,500 points before quickly recovering. This area is marked with a blue circle. Starting in May, the curve begins a steady climb. A second area, also marked with a circle, highlights a phase of stabilization and recovery in the fall, when the index rose above 30,200 points. The data source is S&P Global.
Graph entitled Exchange rate of Canadian dollar against U.S. dollar, in dollars, in 2025. The horizontal axis indicates the months from January to November, and the vertical axis shows the value of the Canadian dollar in U.S. dollars, ranging from $0.67 to $0.74. The curve starts just below $0.70 in January, exhibits erratic fluctuations until April, then climbs steeply to about $0.72 in the spring. During the summer, the Canadian dollar hovers between $0.72 and $0.73. In September, it is close to $0.73. On October 31, it sits at about $0.71. There are two reference lines on the graph: a dotted horizontal line around $0.69 and a vertical line linking this lower bound to the current level with an arrow indicating the increase. The graph thus illustrates a year of strengthening, with the Canadian dollar going from about $0.69 at the start of the year to just over $0.71 in the fall. The data source is Exchange Rates.

The loonie regained altitude

After starting the year at US$0.6956, the Canadian dollar had risen to US$0.7121 by October 31. This upswing has a downside for Canadians who invest in U.S. markets: in effect, the return on the U.S. stock market, which was close to 16% in local currency on October 31, shrinks to about 13% when converted to Canadian dollars.

Graph entitled Exchange rate of Canadian dollar against U.S. dollar, in dollars, in 2025. The horizontal axis indicates the months from January to November, and the vertical axis shows the value of the Canadian dollar in U.S. dollars, ranging from $0.67 to $0.74. The curve starts just below $0.70 in January, exhibits erratic fluctuations until April, then climbs steeply to about $0.72 in the spring. During the summer, the Canadian dollar hovers between $0.72 and $0.73. In September, it is close to $0.73. On October 31, it sits at about $0.71. There are two reference lines on the graph: a dotted horizontal line around $0.69 and a vertical line linking this lower bound to the current level with an arrow indicating the increase. The graph thus illustrates a year of strengthening, with the Canadian dollar going from about $0.69 at the start of the year to just over $0.71 in the fall. The data source is Exchange Rates.

Canada’s economy suffered from the trade war

The trade war instigated by the Trump administration was beginning to have an impact on the Canadian economy by the second quarter. At that point, the gross domestic product (GDP) was down by 0.4% on a quarterly basis, and this trend continued through July and August. At the time of this writing, the third-quarter figures are pending. 

Graph entitled Quarterly change in Canadian GDP, in percent. The horizontal axis shows the quarters from 2023 to 2025, and the vertical axis shows the change in the gross domestic product, from -0.4% to +0.6%. In 2023, the third quarter posted a slight contraction of about -0.1%, followed by growth of +0.2% in the fourth quarter. In 2024, the growth increased: about +0.5% in the first quarter, +0.6% in the second and third quarters and +0.5% in the fourth quarter. In 2025, the first quarter stayed positive at around +0.5%. However, the second quarter posted a net decrease of about -0.4%. This bar is emphasized with a brown box. The data source is Statistics Canada.

Inflation is on target…

After peaking in 2022, inflation, as measured by the Consumer Price Index (CPI), started easing off in Canada. In September 2025, it was about 2.4%. This level is within the target range set by the Bank of Canada, which considers an inflation rate of 1% to 3% desirable to keep the economy running smoothly. Nonetheless, it is an increase over the rate of 1.7% posted in April, May and July.

Graph entitled Change in Canada’s Consumer Price Index, over 12 months. The horizontal axis covers the period from July 2021 to September 2025. The vertical axis represents the inflation rate as a percentage, from 1% to 9%. The curve shows a strong increase starting in 2021: inflation goes from about 3.7% to more than 8% in 2022. After that, it gradually declines, falling below 3% in 2023 and hovering around 2% in 2024 and 2025. A blue dotted line indicates the reduction, connecting the peak of over 8% in 2022 with the rate of 2.4% in September 2025. The data source is Statistics Canada.

… but food prices haven’t followed suit

On the other hand, if it seems to you that prices were still soaring in 2025, you’re not wrong. A look at the table below will show that some CPI components have been bucking the general trend. That’s what happened to food, where prices were up by 3.8% on an annual basis in September. 

Table entitled Changes in key components of Canada’s Consumer Price Index, over 12 months, as at September 30, 2025. This table includes horizontal bars illustrating the percentage change in prices for each category. The Consumer Price Index – all items posted an increase of 2.4%. Food showed the highest increase at +3.8%. This bar is circled to emphasize the difference. Shelter is next at +2.6%. Household operations, furnishings and equipment increased by +2.4%. Clothing and footwear showed a modest increase of +0.8%. Transportation rose by +1.5%. Health and personal care posted significant growth of +2.6%. Recreation, education and reading increased by +1.6%. Finally, alcoholic beverages, tobacco products and recreational cannabis were up by +1.5%. The data source is Statistics Canada.

Interest rates continued to drop

With inflation under control, the Bank of Canada continued to reduce its key interest rate early in the year. It then proceeded with caution, leaving the rate unchanged at 2.75% for six months before dropping it to 2.5% in September and 2.25% in October. The central bank’s next announcement is scheduled for December 10.

In spite of these decreases, if 2026 is the year you have to renegotiate a mortgage you took out in the middle of the pandemic, when rates were at their lowest, be aware that you may have to settle for more expensive terms.

Graph entitled Bank of Canada key policy rate, in percent. The horizontal axis shows a series of dates from March 2024 to October 2025. The vertical axis shows the key policy rate, from 0% to 5.5%. In March 2024, the rate was set at 5.0%. It remained there in April, then began a series of reductions. June 2024: 4.75%. July 2024: 4.5%. September 2024: 4.25%. October 2024: 3.75%. December 2024: 3.25%. January 2025: 3.0%. March 2025: 2.75%. From April to September, the key rate remained steady at 2.75%. In September, it dropped to 2.5%, then dropped again in October to 2.25%. A dotted line with an arrow indicates the distance between the peak of 5.0% in 2024 and the current level of 2.25%. The data source is the Bank of Canada.

The deficit is up again

The Carney government finally tabled a budget on November 4, 2025, reporting the latest increase in the government deficit. For the next fiscal year, the budget forecasts a deficit of $78.3 billion. However, it makes a distinction between operational spending and capital spending, with the latter being used for investments. Out of the year’s estimated $78.3 billion deficit, operational spending accounts for about $33 billion, while capital spending represents some $45 billion. The government plans to completely eliminate the portion of the deficit created by operational spending by fiscal 2028-2029.

You’ll probably pay less in taxes

On July 1, the federal government reduced the tax rate for individuals in the lowest income bracket from 15% to 14%. According to government figures, the maximum tax saving will be $420 per person and $840 per couple. Also according to the government, taxpayers with the lowest income will benefit the most from this tax relief, as illustrated in this graph. This measure is still before Parliament, but it was confirmed in the budget tabled on November 4.

Graph entitled Share of tax relief based on 2025 taxable income. The horizontal axis shows taxable income brackets in dollars, and the vertical axis indicates the share of tax relief pertaining to each bracket, as a percentage, up to 50%. For income of $57,375 or less, the share of tax relief is the highest, at about 45%. This bar is emphasized with a brown box. The bracket from $57,375 to $114,750 gets about 41% of the tax relief. The bracket from $114,750 to $177,882 receives a much smaller share, about 9%. The bracket from $177,882 to $253,414 receives about 3%. Lastly, the income bracket over $253 414 gets only about 2% of the tax relief. Thus, the graph illustrates that most of the tax relief is concentrated in the two lowest income brackets, with lower income households receiving the lion’s share. The data source is the Government of Canada.

Less GST for first-time new home buyers

On June 5, the federal government also proposed legislation to eliminate the goods and services tax (GST) for first-time buyers of new homes worth up to a million dollars, and to reduce it on new housing valued from $1 million to $1.5 million (the GST rebate will decrease as the home value increases). Note that many conditions apply and that this measure, while still before Parliament at the moment, was also confirmed in the November 4 budget.

The inclusion rate increase never happened

In the budget tabled in the spring of 2024, the federal government announced its intention to raise the capital gains inclusion rate from ½ to ⅔ on June 25 of that year. However, on March 21, 2025, the government officially announced the cancellation of this increase. So this measure never came into force after all.

No more “carbon tax” for consumers

The federal government also announced the elimination, effective April 1, 2025, of its fuel charge, also known as carbon pricing or the “carbon tax,” in the provinces where this measure applied. At the same time, an associated measure, the Canada Carbon Rebate, was also eliminated.

What conclusions can be drawn from all these changes that occurred in 2025? What impact will they have on your finances, your investments and your plans? The end of the year – or the beginning of 2026 – could be a good time to gain some clarity, with the help of your advisor.

The following sources were used to prepare this article:

Bank of Canada, “Policy interest rate.”

Desjardins, “More Rate Cuts Are on the Way.”

ExchangeRates, “Canadian Dollar to US Dollar History: 2025.” 

Government of Canada, “Delivering a middle-class tax cut”; “GST/HST new housing rebate”; “Removing the consumer carbon price, effective April 1, 2025.”

La Presse, “Coup de massue pour l’économie canadienne.”

PWC, “Tax Insights: Finance releases draft legislation to increase the capital gains inclusion rate.”

S&P Global, “S&P 500”; “S&P/TSX Composite Index.” 
Statistics Canada, “Consumer Price Index.”

The American Presidency Project, “Executive Orders.”