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.
Bank of Canada raises overnight rate target by 25 basis points to 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 risks that high energy prices spread to other prices. It projects inflation to average 3% in 2027 before returning to its 2% target in mid-2028 and signalled that further rate increases could be needed, while stressing caution amid uncertainty.