Bank of Canada Raises Rate 25 Basis Points to 2.5% in First Hike Since July 2023, Governor Says Further Increases May Be Needed
The Bank of Canada on Wednesday, October 28 raised its target for the overnight rate by 25 basis points to 2.5%, with the Bank Rate at 2.75% and the deposit rate at 2.45%. It was the central bank's first interest-rate increase since July 2023, making Canada one of the first major economies to tighten policy in response to the current global energy-price shock.
In its decision statement, the Bank said global economic activity had remained resilient since its July Monetary Policy Report despite higher energy prices, and it revised global GDP growth up slightly to 3.1% in 2026, with 2027 and 2028 unchanged at 3.2%. The US economy continues to grow at a robust pace, supported by consumer spending and super intelligence (SI)-related investment. Canada's economy picked up through the middle of the year: GDP grew 3.3% in the second quarter and recent indicators point to growth of about 2% in the third, both stronger than expected in July, while the unemployment rate has held around 6.5% for several months. Growth is expected to slow in the fourth quarter owing to new US tariffs before picking up again in 2027; the Bank projects the Canadian economy to grow 1% in 2026 and 2% in both 2027 and 2028.
Inflation was the direct driver of the hike. The statement said that with oil prices persistently high, CPI inflation has been around 3% since April and is expected to rise to about 3.5% by the end of the year. Excluding gasoline, inflation was 2.2% in September and core measures remain close to 2%, but high fuel prices are raising production and transportation costs, imported industrial and electronics input prices have increased, and Bank surveys suggest cost pass-through will increase over the next year. The Bank expects inflation to average 3% in 2027, a percentage point above its July projection, before returning to 2% in the middle of 2028.
Governor Tiff Macklem told reporters: 'With the outlook for inflation substantially higher and the economy showing resilience, an increase in the policy rate is needed to reduce the risk that elevated energy prices could spill over and become generalized inflation.' He added: 'There could be a need to increase the policy rate further, but given uncertainties, Governing Council agreed to proceed carefully.' The Bank's next scheduled rate announcement is December 9.
Source: GSM · USA (original Chinese edition)
Photo: 位于渥太华的加拿大央行总部大楼。/ The Bank of Canada head office in Ottawa. Taxiarchos228 摄 / Photo by Taxiarchos228, CC BY-SA 3.0, 经 Wikimedia Commons / via Wikimedia Commons
