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Canada · Central banks · Inflation & data · Source: Bank of Canada
Bank of Canada lifts policy rate to 2.5%, its first increase since July 2023
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Summary: The Bank of Canada increased its policy interest rate by a quarter point to 2.5% on 28 October 2026. It said high energy prices risk spreading to other prices, and its inflation forecast is now higher and more persistent than in July.
What happened
The Bank raised its target for the overnight rate by 25 basis points to 2.5%. The Bank Rate is now 2.75% and the deposit rate 2.45%. Governor Tiff Macklem said at the press conference: "This is the first interest rate increase since July 2023."
The Bank's rate announcement, which summarises its new Monetary Policy Report, says:
- Inflation: CPI inflation has been around 3% since April and is expected to rise to about 3.5% by the end of 2026. It is forecast to average 3% in 2027, one percentage point above the July projection, and to return to 2% in mid-2028.
- Underlying prices: excluding gasoline, inflation was 2.2% in September, and core inflation measures remain close to 2%.
- Growth: GDP grew 3.3% in the second quarter, and indicators point to about 2% in the third. The economy is expected to grow 1% in 2026 and 2% in both 2027 and 2028.
- Unemployment: around 6.5% for several months.
Background
Macklem said the Governing Council weighed two options, holding or hiking. The case for holding was that price increases have so far been concentrated in energy and energy-intensive services such as airfares, and that the economy still has slack. The case for a hike was that energy prices are higher and expected to stay higher, and that businesses are likely to pass more costs on to customers over the next year.
The Bank said the conflict in the Middle East is in its eighth month "and there is no clear path to resolution." It also pointed to new US tariffs, which it expects to slow Canadian growth in the fourth quarter. Globally, it raised its 2026 growth estimate slightly to 3.1%.
Why it matters for markets and crypto
The Bank noted that global financial conditions have tightened since July, with higher government bond yields and volatile equity and credit markets. Interest-rate changes affect borrowing costs and the general climate for financial assets, but the decision has no direct link to crypto-assets. It relates to the wider economy.
What to watch next
- 9 December 2026: next scheduled rate announcement.
- 27 January 2027: next Monetary Policy Report.
The Bank said further increases could be needed but that it would "proceed carefully" and take decisions one meeting at a time.
Sources
- Bank of Canada, "Bank of Canada raises the policy rate by 25 basis points to 2½%", 28 October 2026
- Bank of Canada, Tiff Macklem, Monetary Policy Report press conference opening statement, 28 October 2026
- The Canadian Press via BNN Bloomberg, "Text of the Bank of Canada's latest policy interest rate decision", 28 October 2026
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