Bank of Canada raises rate to 2.5% and lifts inflation path in October MPR
Published · Updated
What happened
The Bank of Canada increased the policy rate by 25 basis points to 2.5% and published an October Monetary Policy Report with a higher inflation track. The report says CPI is expected to stay above 3% through much of 2027 and return to target only by mid-2028, with energy prices and Canada-U.S. trade relations identified as the main inflation risks.
Why it matters
A central bank rate increase combined with a higher inflation path changes near-term expectations for borrowing costs, wage bargaining, and fiscal room. By naming energy prices and Canada-U.S. trade relations as the main risks, the Bank has put external price and trade developments into the core domestic policy outlook.
The Bank of Canada on October 28 raised its policy rate by 25 basis points to 2.5% and, in its October Monetary Policy Report, revised its inflation outlook higher. The Bank said CPI is now expected to remain above 3% through much of 2027 and return to the 2% target only by mid-2028. The report named energy prices and Canada’s trade relationship with the United States as the two most important inflation risks, tying near-term Canadian inflation management to oil moves and potential U.S. tariff actions.
Watch for
Government of Canada release on 2026 fall fiscal planning or affordability measures by 2026-10-31 Bank of Canada Governor Tiff Macklem statement or testimony by 2026-10-31 clarifying the conditions for another rate increase Government of the United States announcement by 2026-10-31 on any new tariff measure affecting Canadian goods ICE Brent front-month settlement and Western Canada Select price move on 2026-10-29 to 2026-10-31 that extends the post-MPR energy-price risk signal
Sources
- Bank of Canada raises the policy rate by 25 basis points to 2½% · bankofcanada.ca
- Monetary Policy Report—October 2026 · bankofcanada.ca
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