The Bank of Canada announces its rate decision on Wednesday, October 28 at 9:45 a.m. ET, alongside a Monetary Policy Report, with the policy rate at 2.25% where it has stood since October 2025. Markets price about an 81% chance of a quarter-point increase to 2.50%, according to Investing Live, which would be the first move in a year.
A Reuters poll of economists taken October 21 to 23 found 19 of 34 expecting the increase this week and 16 of 29 expecting a second one by the end of March 2027, taking the rate to 2.75%. In the previous poll, 80% of respondents expected a hold through the end of 2026.
The difficulty is that the data of the past three weeks point in different directions. Headline inflation rose to 3.1%, while the core measures the Bank prefers eased and employment fell by 110,000 jobs across August and September.
What Moved the Market After the Bangkok Remarks
Governor Tiff Macklem spoke to reporters at the close of the IMF meetings in Bangkok on October 17. He reiterated a bias toward raising the inflation forecast in the October report and framed the decision as a question of whether inflation will return to target on its own or whether, in his words, the Bank will have to raise interest rates to influence the path, Scotiabank Economics reported on October 19.
Market pricing for October roughly doubled on Monday, from about 9 basis points of tightening to about 18, and Canadian yields rose by more than U.S. Treasury yields, Scotiabank said.
The shift followed a speech in Halifax on September 21, in which Macklem said the Bank did not want to raise rates and restrain growth if inflationary pressures were contained, but did not want to be too slow to respond if they became more persistent, according to Yahoo Finance. By the calculation of the Bank, oil is about US$40 above where it should be, and Macklem said inflation would rise in the coming months if crude stays near US$100 a barrel.
The policy rate has sat at 2.25% for twelve months after 275 basis points of cuts from the 5.00% peak, and the majority of economists in the Reuters poll now expect that plateau to end this week and to be followed by a second increase by March.
The solid line shows the overnight rate in effect at each month end through September 2026. The dashed line shows the October increase that markets price at about 81% and the second increase to 2.75% that 16 of 29 economists in the Reuters poll expect by the end of March 2027. The poll gives no month for the second increase, so March is shown. It is an expectation, not a Bank of Canada commitment.
The Case Against a Hike: Core Is Cooling and Employment Is Falling
Statistics Canada reported on October 19 that CPI-trim eased to 1.8% and CPI-median to 1.9% in September, both lower than economists expected, according to Briefs. The share of CPI items rising 3% or more fell to 29.2% from 34.2%. Excluding food and energy, inflation held at 2.1%.
The labour market is softer. Canada lost 68,000 jobs in September after 42,000 in August, and the unemployment rate rose to 6.5% from 6.4%, The Hub reported on October 9. Average hourly wages rose 2.3% from a year earlier, and Ontario unemployment reached 7.0%, the highest among the large provinces.
Andrew Grantham, senior economist at CIBC, said the data suggest little rush and that policymakers can take more time to assess trade and tariff developments before raising rates. Leslie Preston, senior economist at TD, said there is little evidence that higher energy costs are bleeding through to broader price pressures.
The Case for a Hike: Momentum, Expectations and Oil
Year-over-year readings are not the whole picture. Desjardins reported that the three-month annualized, seasonally adjusted average of CPI-trim and CPI-median rose to 2.6% in September from 2.3% in August, even as the annual rate eased. Derek Holt of Scotiabank Economics noted before the release that traditional core inflation had risen at 3% or faster on an annualized monthly basis for four straight months.
HSBC expects an increase because long-term consumer inflation expectations are rising despite soft hard data, according to Investing Live. LJ Valencia of Desjardins pointed to rising expectations in the business and consumer surveys of the Bank and to the retaliatory tariffs Canada introduced on September 8.
Oil keeps the pressure on. The Canadian Press reported the December crude contract near US$97 a barrel on October 20, and Statistics Canada said gasoline was up 27.8% year over year in September.
What the Monetary Policy Report Has to Settle
With the increase largely priced, the reaction will depend on the report forecasts and the forward guidance, Investing Live noted. A hold would likely send the loonie sharply lower, while a hike with guidance that further increases depend on inflation broadening would test the second move that the poll majority expects. Remaining decisions this cycle fall on December 9, January 27 and March 3.
Growth is the other constraint. The Reuters poll puts real GDP growth at about 1.0% in 2026, against 0.7% in the July report from the Bank, with third-quarter growth near 1.9% annualized. Macklem warned that if U.S. tariffs stay in place, growth could be cut roughly in half to below 1% in the final months of 2026. Statistics Canada publishes August GDP on Friday, October 30.
The household channel is arithmetic. A quarter-point increase adds about $1,250 a year in interest on a $500,000 variable-rate balance, an HDQ calculation, and it moves short-term yields and the Canadian dollar on the day. The next test of the inflation signal is the October CPI release, which Statistics Canada schedules for November 16.