- Decision
- Raise
- Rate change
- 25 bps
- overnight rate
- 2.5%
The Bank of Canada raised its overnight rate target by 25 basis points to 2.5%, citing more persistent inflation, strengthening growth and the risk that high energy prices spread more broadly to other prices, after holding at 2.25% following a 25-basis-point cut in October 2025. The Bank Rate stands at 2.75% and the deposit rate at 2.45%. The central bank projects consumer price inflation to average 3% in 2027 before returning to the 2% target in mid-2028, with businesses expected to pass through more cost increases over the next year. Growth forecasts were revised higher, although new US tariffs are expected to slow activity in the fourth quarter before a recovery in 2027. Indicators continue to show some excess supply in the economy. The Canadian dollar recovered following earlier weakness linked to US-dollar strength. Global activity remained resilient despite higher energy prices, while elevated oil prices and refinery margins pushed inflation higher in most countries. Governing Council signalled that further rate increases could be needed but said it would proceed carefully given the uncertainty.
Rate evolution
From June 2025 to September 2026, the Bank of Canada lowered its target for the overnight rate by 50 basis points to 2.25%, after holding at 2.75% through July 2025, cutting in September and October 2025, and then pausing through September 2026. The initial holds reflected high uncertainty over US tariffs and trade negotiations, while the cuts followed weakening exports and business investment, increased labour market slack and fading core inflation momentum, before the Bank said the policy rate was about right if inflation stayed near 2% and activity evolved broadly as projected.
It held at 2.25% on June 10 and July 15, 2026, as uncertainty about US trade policy persisted and the conflict in the Middle East kept oil prices elevated, while the economy remained in excess supply even as growth picked up and broadened. On June 10, the Bank looked through a rise in headline inflation to 2.8% in April because core inflation had moved down to around 2% and there was limited evidence of broad-based pass-through, while by July 15 it judged the policy rate appropriate to sustain the recovery and return inflation to 2%, with second-quarter growth estimated at 2.5% and labour market conditions still soft.
On September 2, the Bank again held the rate as the economy and inflation evolved broadly as forecast, noting that second-quarter gross domestic product rose 3.3% and excess supply persisted, while consumer price index inflation hovered around 3% mainly because of gasoline prices and core measures remained close to 2% in July, even as prolonged high oil prices and new tariffs increased upside inflation risks and uncertainty over growth. On October 28, it raised the policy rate by 25 basis points to 2.5% as growth strengthened and inflation was projected to remain higher for longer, seeking to reduce the risk that persistently high energy prices spread broadly to other goods and services amid building cost pressures and signs of increased pass-through, while signalling that further increases could be needed but that it would proceed carefully.