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Economy

Bank of Canada Raises Rate to 2.50% in First Increase Since July 2023

The Bank of Canada raised its overnight rate by a quarter point to 2.50% on Wednesday, its first increase since July 2023, as policymakers said high energy costs could push inflation higher across the economy.

By admin Oct. 28, 2026 · 6:42 PM ET 2 min read

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OTTAWA, Oct. 28, 2026 – The Bank of Canada raised its overnight rate by a quarter of a percentage point to 2.50% on Wednesday, its first increase since July 2023. The central bank also set the Bank Rate at 2.75% and the deposit rate at 2.45%, and the decision was announced at 9:45 a.m. Eastern.

A stone building with tall columns and arched doorways beside an empty street

Policymakers said further increases might be needed to stop high energy costs from feeding into prices across the economy. Reuters reported that the move was the first rate increase in more than three years, and that the bank pointed to the risk that energy costs spread into a wider range of consumer prices.

Inflation path and growth outlook

Annual consumer price inflation in Canada has been around 3% since April, according to WRE News, which cited the bank. The bank expects inflation to reach about 3.5% by the end of 2026 and to average 3% in 2027 before moving back toward its 2% target in the middle of 2028.

Detached houses along a wet residential street covered with fallen autumn leaves

Growth has been stronger than the bank expected in July, including 3.3% annualized growth in the second quarter, WRE News reported. The bank projects growth of 1% in 2026 and 2% in each of the next two years, while it expects housing activity to stay relatively weak.

Market reaction and what comes next

Canadian bond yields rose after the decision, Reuters reported. The two-year yield rose as much as 7.2 basis points to 3.441%, its highest level since August 2024, before pulling back to 3.413%, while the 10-year yield rose 2.4 basis points to 3.885%. The Canadian dollar traded 0.1% higher at 1.4035 per U.S. dollar, or 71.25 U.S. cents.

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Strategists at TD Securities, including Andrew Kelvin, said in a note that the bank has a tendency to move in consecutive steps after a long pause, and that they see a lower bar for another hike in December, Reuters reported. Investors see a 45% chance of a further hike in December and have fully priced in a second hike by January, according to swap market data cited by Reuters. The bank did not commit to another increase, and its next scheduled rate decision is December 9.

Reporting based on coverage by Reuters and WRE News.

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