October 29: The Bank of Canada raised its policy interest rate by a quarter of a percentage point to 2.50% on October 28, as elevated energy prices complicated its inflation outlook. The decision shows how the same global energy pressures can produce different policy responses across economies.
Key highlights
- The policy rate rose 25 basis points, from 2.25% to 2.50%.
- The Bank Rate is 2.75% and the deposit rate is 2.45%.
- The bank expects inflation to return to 2% around mid-2028.
- Its next scheduled policy decision is December 9.
The decision and the forecast
| Measure | October announcement |
|---|---|
| Policy interest rate | 2.50% |
| Bank Rate | 2.75% |
| Deposit rate | 2.45% |
| Next scheduled decision | December 9, 2026 |
| Next Monetary Policy Report | January 27, 2027 |
The central bank’s October Monetary Policy Report projects inflation averaging about 3% in 2027 before returning to the 2% target around the middle of 2028. A forecast is the bank’s conditional assessment, not a guarantee of the eventual outcome.
Why energy prices matter
In its decision statement, the bank identified high oil prices and refinery margins as sources of inflation pressure internationally. It also described the risk that continuing cost pressures could pass through more broadly into prices.
Energy can affect an economy through several channels. Households pay directly for fuel and utilities, while businesses may face higher transport and production costs. How much of a cost increase reaches the final customer depends on contracts, competition and the business’s ability to absorb it.
That distinction helps explain why a central bank looks beyond a single fuel-price movement. It is assessing whether price pressure remains concentrated or becomes more persistent across the economy. The October decision reflects the bank’s assessment of that risk in Canada.
The links to Asia and global trade
The bank’s global assessment cited a third-quarter rebound in China supported by exports and fiscal measures, alongside resilient activity elsewhere. It forecast global growth of 3.1% in 2026 and 3.2% in both 2027 and 2028.
For Asian exporters, Canadian demand and global financing conditions are relevant but distinct considerations. A Canadian rate increase does not automatically establish a fall in orders for a particular Asian supplier. Contract terms, customer demand and exchange rates also affect the commercial outcome.
The same caution applies to families paying Canadian tuition or receiving remittances. Their immediate cost depends on the exchange rate and transfer charges at the time of payment. The policy announcement alone cannot provide a reliable currency-price forecast.
What 25 basis points means in a simple example
Our calculation: A 0.25-percentage-point change applied in full for one year to an unchanged C$100,000 balance equals C$250 in simple annual interest: 100,000 × 0.0025. This illustration excludes compounding, fees and changes in the balance.
It is not a quotation for a mortgage or a promise that every borrower’s bill changes by that amount. The actual effect depends on whether the contract is fixed or variable, its benchmark, reset date and repayment structure.
What to watch
The bank said further increases might be required while stressing that it would proceed carefully. That leaves future decisions conditional on new evidence. The December 9 announcement will be the next scheduled policy checkpoint; inflation releases and the bank’s communications will help show how the outlook is evolving.
Sources
- Bank of Canada: Policy-rate decision, October 28, 2026
- Bank of Canada: Monetary Policy Report, October 2026
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