Bank of Canada Raises Policy Rate to 2.5% as Inflation Risks Persist

Conceptual illustration of a maple leaf, coin stacks and a rising arrow outside a central-bank building

Updated: October 28, 2026, 11:50 a.m. EDT (Toronto)

The Bank of Canada raised its policy interest rate by a quarter of a percentage point to 2.5% on Wednesday, October 28, saying higher energy costs risk spreading more broadly through the economy. The Ottawa announcement marked its first rate increase since July 2023, Reuters reported.

The central bank’s official decision also set the Bank Rate at 2.75% and the deposit rate at 2.45%. Its Governing Council said a stronger growth outlook and more persistent inflation warranted an increase to reduce the risk that elevated energy prices feed into other goods and services.

The bank expects consumer-price inflation to rise to about 3.5% by the end of this year and remain around 3% through much of 2027, before returning close to its 2% target in mid-2028. It said businesses had largely absorbed higher input costs so far, but surveys pointed to more of those costs being passed on over the coming year.

Its updated outlook projects Canadian economic growth of 1% in 2026 and 2% in both 2027 and 2028. The bank cautioned that new U.S. tariffs would slow growth in the final quarter of this year and that trade relations remained a major source of uncertainty.

Governing Council said further increases could be needed but it would proceed carefully. That is a conditional assessment rather than a commitment to another hike. The next scheduled policy-rate decision is December 9; the next Monetary Policy Report is due January 27, 2027.

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