FX.co ★ Bank of Canada Raises Rates for 1st Time Since 2023

The Bank of Canada raised its benchmark policy rate by 25 bps to 2.5% in October 2026, its first increase in three years and in line with market expectations. Policymakers said the move is intended to limit the risk that persistently high energy prices spill over into broader inflation across goods and services, while noting that further rate increases may be required, though any additional tightening will be approached cautiously. The central bank also highlighted that inflation is higher and more persistent than projected in the July Report. Economic growth has strengthened this year and is expected to continue recovering. Policymakers reaffirmed their commitment to preserving Canadians’ confidence in price stability. CPI inflation is now projected to average 3% in 2027—one percentage point above the July forecast—before easing to 2% by mid-2028. The Canadian economy is expected to grow by 1% in 2026, and by 2% in both 2027 and 2028, representing a somewhat stronger overall growth outlook than in the July Report.