The Bank of Canada increased its overnight rate target by 25 basis points to 2.5% on October 28, its first hike since 2023, warning that further increases could be needed if high oil prices keep inflation elevated.
The Bank of Canada raised its target for the overnight rate by 25 basis points to 2.5 percent on October 28, the first increase since July 2023.
Governor Tiff Macklem said the move was needed to reduce the risk that persistently high energy prices linked to the Middle East conflict would spread more broadly through the economy. The bank also raised its 2027 inflation forecast to 3.1 percent from 2.0 percent projected in July.
The decision was widely expected by markets. The accompanying Monetary Policy Report projected Canadian growth of 1 percent in 2026 and inflation remaining around 3 percent through much of 2027 before returning near the 2 percent target in mid-2028.
The official press release and Macklem’s opening statement are the primary sources for the rate change and the rationale. Reuters and Bloomberg corroborate the market reaction and the revised forecasts.
The hike comes as other central banks have also begun tightening in response to energy-driven price pressures. The next scheduled decision will show whether the bank follows through on its warning of possible further increases.
People Sentiments Public Mood: Negative
- Macklem: proceed carefully given uncertainties