Business · Economy · 2 hrs ago
Bank of Canada raises policy rate by 25 basis points to 2.5%
The Bank of Canada raised its key rate to 2.5% on Wednesday, an increase of 0.25 percentage points.
The decision affects borrowing costs across Canada, including rates on some loans and savings.
The bank said high oil prices have kept inflation near 3% since April and could push it to about 3.5% by year-end.
It also pointed to rising costs for businesses and higher near-term inflation expectations.
Canada’s economy grew faster than expected through the middle of 2026, but the bank expects US tariffs to slow growth in the fourth quarter.
It forecasts economic growth of 1% in 2026 and 2% in both 2027 and 2028.
The outlook remains uncertain, especially because of Canada-US trade relations, while the bank expects growth to pick up again next year.
The Bank of Canada raised its policy interest rate by 25 basis points to 2.5 per cent on Wednesday.
The Bank Rate is now 2.75 per cent, and the deposit rate is 2.45 per cent.
The bank said Canadian economic growth picked up through the middle of 2026, but new U.S. tariffs are expected to slow growth in the fourth quarter.
It expects Canada’s economy to grow 1 per cent in 2026 and 2 per cent in both 2027 and 2028.
Inflation has been around 3 per cent since April, and the bank expects it to rise to about 3.5 per cent by year-end.
- Who
- The Bank of Canada.
- What
- It raised its target for the overnight rate by 25 basis points to 2.5 per cent.
- When
- Wednesday, October 28, 2026.
- Where
- Ottawa, Canada.
- Why
- The decision cites persistently high oil prices and inflation pressures. Before the decision, investors expected a hike to help prevent energy-led inflation from spreading through the economy.
This story does not have two clearly opposing sides.
Investors anticipated a Bank of Canada rate hike as the Canadian dollar weakened against its U.S. counterpart.
The Bank of Canada raised its target for the overnight rate by 25 basis points to 2.5 per cent.
- Policy rate
- 2.5 per cent, after a 25-basis-point increase
- Bank Rate
- 2.75 per cent
- Deposit rate
- 2.45 per cent
- Canadian GDP growth
- 3.3 per cent in the second quarter of 2026
- Inflation outlook
- About 3.5 per cent by the end of 2026
- Economic growth forecast
- 1 per cent in 2026; 2 per cent in 2027 and 2028
5 sources
‘We think it’s premature’: Expert reaction to the Bank of Canada’s first rate hike since 2023
Bank of Canada raises interest rate as inflation projected to worsen
Canadian dollar extends pullback ahead of ‘pivotal’ BoC rate decision that Scotiabank predicts could reignite the currency
What people are saying
The Bank of Canada today increased its target for the overnight rate by 25 basis points to 2.5 per cent, with the Bank Rate at 2.75 per cent and the deposit rate at 2.45 per cent.
Everyone is looking forward to a pivotal day.