Bank of Canada oil inflation decision: first rate hike in 3 years expected

The date and the time. On Wednesday, 28 October 2026, the Bank of Canada will announce its decision on the overnight rate target at 09:45 Eastern Time, which is 13:45 UTC. The quarterly Monetary Policy Report comes out with it. At 10:30 ET Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers hold a press conference. The bank joins a busy central bank week: the US Fed also decides on Wednesday.

Where the rate stands. The policy rate is 2.25%. The bank held it on 2 September and has kept it there since October 2025. Its inflation target is 2%, inside a range of 1% to 3%.

Why a hike is expected. The consumer price index rose 3.1% in September from a year earlier, after 3.0% in August. Gasoline was up 27.8%. Without gasoline, inflation was 2.2%, down from 2.4%. The bank's two preferred measures of underlying inflation each slipped to 1.9% and 1.8%. Still, on 17 October at the IMF meetings in Bangkok, Macklem said that if oil stays around US$100, inflation should gradually drift up from about 3%, and that the bank will likely raise its inflation forecast. Brent crude then hit a six-month high of US$116 on Friday. Markets then moved from about a 35% chance of a hike to nearly 90%, per Bloomberg data.

The case against. Not everyone is convinced. Jeremy Kronick of the C.D. Howe Institute says the data as a whole is not convincing, and that markets are reacting almost entirely to Macklem's words. Avery Shenfeld of CIBC says a hike could be fine if trade talks go well and energy prices stay high, but a mistake if oil and trade policy go the other way. The bank has surprised markets before. There is an argument for a hike too: a bank survey showed a sharp jump in longer-term inflation expectations, and companies increasingly plan to pass higher costs on to customers.

What it means. A hike makes variable-rate borrowing costlier, including variable mortgages and some car, tuition and business loans. Longer-term bond yields, which underpin mortgage rates, have already climbed. Nathan Janzen of RBC says that for people borrowing at fixed rates, the direction matters more than whether the first hike comes now or a few months later. Markets expect four quarter-point hikes by the end of 2027, including this one, which would take the rate to 3.25%. The Canadian dollar and markets usually react more to whether a decision matches expectations than to the hike itself. That is our view, not a fact. The timing is delicate: the housing market is in a deep slump, unemployment is elevated and the US has threatened new tariffs on Canadian autos.

حقائق مؤكدة

• On Wednesday, 28 October 2026, the Bank of Canada will announce its decision on the overnight rate target at 09:45 Eastern Time and publish its quarterly Monetary Policy Report at the same time.^[1]
• Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers hold a press conference at about 10:30 ET on 28 October.^[1]
• On 2 September 2026 the Bank of Canada held its target for the overnight rate at 2.25%.^[2]
• The benchmark rate has been 2.25% since October 2025. The inflation target is 2%, within a range of 1% to 3%.^[5]
• A hike on 28 October would be the first by the Bank of Canada in more than three years, and many economists expect it.^[4][5]
• According to Bloomberg data, markets moved in a matter of days from pricing a roughly 35% chance of a quarter-point hike on 28 October to nearly 90%.^[4]
• The consumer price index rose 3.1% year over year in September, after 3.0% in August. Gasoline rose 27.8% year over year. Excluding gasoline, the index rose 2.2%, after 2.4% in August.^[3]
• The Bank of Canada's two preferred measures of underlying inflation each fell a notch in September, to 1.9% and 1.8%.^[4]
• On 17 October in Bangkok, Macklem said that if oil prices stay around US$100, inflation should gradually drift up from about 3%, and that the bank will likely raise its inflation forecast on 28 October.^[4]
• Brent crude hit a six-month high of US$116 a barrel on Friday, 23 October, and West Texas Intermediate traded at US$103.^[4]
• Scotiabank, Desjardins and BMO Capital Markets economists forecast a 0.25 percentage point hike on 28 October.^[5]
• Markets expect four quarter-point hikes by the end of 2027, including one this week, which would take the policy rate to 3.25%.^[4]
• Jeremy Kronick of the C.D. Howe Institute said the data in aggregate is not convincing to hike. Avery Shenfeld of CIBC said a hike could prove to be a policy mistake if oil prices and trade policy go the other way.^[4]
• A Bank of Canada consumer survey showed a sharp jump in longer-term inflation expectations, and a business survey showed companies increasingly plan to pass rising costs on to customers.^[4]
• The US Fed also announces its rate decision on Wednesday.^[4]
• The housing market is in a deep slump, unemployment is elevated and the US has threatened additional tariffs on the Canadian auto sector.^[4]
• Nathan Janzen of RBC said that for households and businesses borrowing at fixed rates, it does not make a big difference when the first hike comes, because longer-term bond yields have already climbed.^[4]
• Higher rates can raise costs for variable-rate mortgages and some loans for cars, tuition and business.^[5]

التبعات

• مؤكدThe decision comes at 09:45 ET on 28 October and the policy rate is now 2.25%.
• مؤكدEconomists and markets widely expect a quarter-point hike, but the data on underlying inflation is subdued, so a surprise is possible.
• مؤكدIf the bank hikes, variable-rate borrowing gets costlier.
• قراءتناThe Canadian dollar and markets are likely to react more to the gap between the decision and expectations than to the hike itself.
• قراءتناThe new inflation forecast and the tone of the press conference may matter as much as the rate, because they show how many more hikes the bank sees.

لا يزال مجهولًا

• Whether the bank hikes on 28 October or holds.
• How high the bank's new inflation forecast will be.
• How many more hikes the bank has in mind.
• How long oil prices stay high.

من يتأثر

Canada. Anyone who borrows in Canadian dollars, trades the currency or follows how central banks react to oil prices

المصادر

1. Bank of Canada: Bank of Canada interest rate announcement and release of the Monetary Policy Report 23 أكتوبر 2026 · رسمي
2. Bank of Canada: Bank of Canada maintains the policy rate at 2¼% 2 سبتمبر 2026 · رسمي
3. Statistics Canada: The Daily: Consumer Price Index, September 2026 19 أكتوبر 2026 · رسمي
4. The Globe and Mail: Bank of Canada expected to raise benchmark rate for first time in three years as oil shock persists 25 أكتوبر 2026 · إعلام
5. Global News: Bank of Canada expected to raise rates next week, some economists say 21 أكتوبر 2026 · إعلام