Bank of Canada interest rate rises to 2.5%: first hike since 2023

What happened. On 28 October 2026 the Bank of Canada raised its target for the overnight rate, its policy rate, by 25 basis points (0.25 points) to 2.5%. The Bank Rate is now 2.75% and the deposit rate 2.45%. The rate had been 2.25% since the last cut on 29 October 2025, so this is the first move in a year and the first hike since 2023. Economists expected it: in a Reuters poll, 19 of 34 said the Bank would hike to 2.50%.

Why now. As La Presse reports it, the Governing Council raised the rate to reduce the risk that persistently high energy prices spread to the prices of other goods and services. According to Reuters, annual inflation rose to 3.1% in September, driven almost entirely by energy, while core measures that strip out volatile items eased below 2%. The Bank's report says inflation is pushed up by higher gasoline prices, and that oil prices and refinery margins stay elevated before easing slowly.

The outlook. The Bank sees inflation staying near 3% or a bit above through much of 2027 and getting back close to 2% by the middle of 2028. It expects growth of 2% in 2027 and 2028 and, according to La Presse, about 1% in 2026. It warns that renewed trade tensions with the United States will weigh on near-term growth.

What it can mean for you. Reuters wrote before the decision that a hike would likely push up bank lending rates and mortgage costs and could slow growth. If you have a variable-rate loan, a credit line or a mortgage to renew, check how your lender links its rates to the policy rate. How much of the hike lenders pass on is not known yet.

Beyond Canada. The Bank's report says reduced oil supply from the Middle East and strains on refining capacity are pushing up inflation globally, and that yields on long-term government bonds in many advanced economies have reached their highest levels in more than a decade. Canada's move sits inside that wider picture.

Our take. One hike does not make a trend. The Bank itself says more increases may be needed, but it will go carefully. This is not advice to borrow, lend, buy or sell anything.

حقائق مؤكدة

• On 28 October 2026 the Bank of Canada raised its target for the overnight rate by 25 basis points to 2.5%.^[1][2][7]
• The Bank Rate is 2.75% and the deposit rate is 2.45%.^[2]
• Before the decision the rate was 2.25%. The previous change, a cut of 0.25 points, came on 29 October 2025.^[4][5][7]
• This is the first hike since 2023 and the first change in the rate in a year.^[4][5]
• The Governing Council raised the rate to reduce the risk that persistently high energy prices spread to the prices of other goods and services. It says the rate may need to rise further, but given the uncertainty it will proceed with caution.^[5]
• The Bank expects inflation near 3% or a bit above through much of 2027, then close to 2% by the middle of 2028.^[2][3]
• Higher gasoline prices push inflation up. Oil prices and refinery margins remain elevated, and the Bank assumes they decline gradually.^[3]
• The Bank projects growth of 2% in 2027 and 2028. Renewed trade tensions with the US will weigh on near-term growth.^[3]
• The Bank expects growth of about 1% in 2026.^[5]
• Annual inflation in Canada rose to 3.1% in September, driven almost entirely by energy. Core measures eased below 2%.^[6]
• In a Reuters poll on 21-23 October, 19 of 34 economists expected a hike to 2.50%.^[6]
• Reduced oil supply from the Middle East and strains on refining capacity are pushing up inflation globally. Long-term sovereign bond yields in many advanced economies are at their highest in more than a decade.^[3]
• The next interest rate announcement is scheduled for 9 December.^[4]

التبعات

• مؤكدThe Bank could raise the rate further: it says this may be needed.
• قراءتناVariable-rate loans and mortgages at renewal may get costlier.
• قراءتناGrowth could slow because borrowing gets more expensive.

لا يزال مجهولًا

• Whether the Bank hikes again on 9 December or pauses.
• How fast oil prices and refinery margins fall.
• How the trade relationship with the US will affect growth and inflation.
• How much of the hike lenders will pass on to loan rates.

من يتأثر

Canada, Worldwide. Borrowers and mortgage holders in Canada, and anyone following energy-driven inflation and central bank rates

المصادر

1. Bank of Canada: Bank of Canada raises the policy rate by 25 basis points to 2½% 28 أكتوبر 2026 · رسمي
2. Bank of Canada: Monetary Policy Report Press Conference Opening Statement (page with the rate announcement summary) 28 أكتوبر 2026 · رسمي
3. Bank of Canada: Monetary Policy Report, October 2026 28 أكتوبر 2026 · رسمي
4. Bank of Canada: Policy interest rate 28 أكتوبر 2026 · رسمي
5. La Presse: Première hausse depuis trois ans: les taux d'intérêt repartent à la hausse au Canada 28 أكتوبر 2026 · إعلام
6. Reuters: Bank of Canada poised to hike key rate for first time in three years 28 أكتوبر 2026 · إعلام
7. TVA Nouvelles: Hausse du taux directeur: il passe à 2,5% 28 أكتوبر 2026 · إعلام