The Bank of Canada Reverses 25 Basis Points of a 275-Point Easing Cycle

The Bank of Canada raised its policy rate to 2.50% on October 28, its first increase since July 2023, as the Monetary Policy Report lifted inflation projections for 2026 and 2027. Photo: iStock.

Economy

The Bank of Canada Reverses 25 Basis Points of a 275-Point Easing Cycle

Oct 29, 2026 5 min The Economy Desk

The Brief

The Bank of Canada raised its policy rate 25 basis points to 2.50%, ending seven straight holds and reversing a small part of the 275 points of easing since 2024.
Governor Macklem said more increases could be needed, but that Council will proceed carefully, one meeting at a time.
The Bank now projects inflation of 2.9% in 2026 and 3.1% in 2027, up 0.4 and 1.1 points from earlier forecasts.
Growth is projected at 2.0% in 2027 and 2028, after a 3.3% annualized second quarter.
The Fed held at 3.75% to 4.00% in a 10 to 2 vote, leaving the Bank of Canada 1.25 to 1.50 points below it.

The Bank of Canada raised its policy rate by 25 basis points to 2.50% on October 28, ending a hold at 2.25% that ran through seven consecutive meetings. It is the first increase since July 2023. Governing Council discussed holding again, and the decision came with higher inflation forecasts and a warning that more could follow.

The October increase reverses 25 basis points of the 275 the Bank delivered between June 2024 and October 2025, when the rate fell from a 5.00% peak to 2.25%.

BANK OF CANADA: POLICY RATE 2.50% ▲ 0.25 PTS ON OCT 28 BY DECISION | JAN 2022 TO OCT 2026

Source: Bank of Canada, target for the overnight rate (V39079), rate changes January 2022 to October 28, 2026. | hdq.ca

Each step marks a Governing Council rate change; hold decisions do not appear as steps. The overnight rate was 0.25% at the start of 2022.

What Governing Council Decided

The Bank Rate moved to 2.75% and the deposit rate to 2.45%. Governor Tiff Macklem said there could be a need to increase the policy rate further, but that given the uncertainties Council agreed to proceed carefully and take decisions one meeting at a time.

He also said the rate remains low enough that it does not restrain growth, which places it at the low end of the neutral range. That framing matters for the path ahead. A rate that is not restraining the economy leaves room for further increases without a change in the Bank assessment of demand.

The Forecast Behind the Move

The October Monetary Policy Report raised the inflation path. The Bank now expects inflation to average 2.9% in 2026, up 0.4 percentage points, and 3.1% in 2027, up 1.1 points from 2.0%. The Hub reported that the Bank does not see the 2% target restored until mid-2028.

Energy is the main source. Statistics Canada reported September CPI of 3.1%, with energy up 19.0% from a year earlier and gasoline up 27.8%. Core measures were softer, with CPI-trim at 1.8% and CPI-median at 1.9%, so the Bank is leaning against a price shock that has not yet spread through the whole basket.

Growth supports the decision. Output rose at a 3.3% annualized pace in the second quarter, and the Bank projects 2.0% in the third quarter and 0.8% in the fourth. It forecasts GDP growth of 2.0% in both 2027 and 2028, up from 1.8% previously.

How Markets and Borrowers Responded

Reuters reported that the two-year government bond yield reached a two-year high after the announcement and that the Canadian dollar firmed to about C$1.4050, or 71.17 US cents. Markets are pricing several more increases over the next year. Charles St-Arnaud of Servus said he would be surprised if there was no increase in December, and KPMG is also calling for one.

The Monetary Policy Report noted that long-term sovereign yields are at their highest in more than a decade. Lenders had moved ahead of the Bank: the big six banks raised fixed mortgage rates during October, and Ratehub listed the lowest insured five-year fixed rate at about 4.34% on October 9. Mortgage broker Ron Butler said a five-year fixed rate starting with a 5 is possible within six to eight weeks.

A Widening Gap With the Fed

The Federal Reserve held its target range at 3.75% to 4.00% on the same day, in a 10 to 2 vote. Governor Lisa Cook and Cleveland Fed president Beth Hammack dissented in favour of a 25 basis point increase, the first time since 1992 that a governor and a regional president dissented together. Chair Kevin Warsh gave no explicit guidance.

The Bank of Canada policy rate now sits 1.25 to 1.50 percentage points below the Fed range, with US inflation at 3.7%. Both central banks meet next on December 9, and both face energy-driven inflation with a war premium still embedded in Brent crude.

Sources

Bank of Canada, Monetary Policy Report and policy rate announcement, October 28, 2026; Bank of Canada, target for the overnight rate (V39079); Statistics Canada, Consumer Price Index, September 2026; Reuters, The Canadian Press, CBC and The Hub coverage of the October 28 decision; Federal Reserve, FOMC statement, October 28, 2026; Ratehub, mortgage rate listings, October 9, 2026.

Educational content only. This article is published for informational and professional development purposes. It does not constitute investment advice, financial planning advice, or a recommendation to buy or sell any security. Canadian advisors should apply their own professional judgment. Full disclaimer.

Advisor Toolkits — Oct 29, 2026

🛡️ Respond ▼

What They're Feeling

Homeowners with renewals in 2026 and 2027 are bracing for higher payments after hearing that more increases could follow. Clients with bond funds are watching prices fall as yields rise. Savers are pleased by higher GIC rates but unsure whether to lock in.

What to Say

The Bank of Canada raised its rate to 2.50% on Wednesday and said more increases could be needed, though it will decide one meeting at a time. Next decision is December 9. Nothing about that is a reason to change your plan today. What it does mean is that we should look at when your mortgage renews, how long your bonds take to mature, and whether your GICs are laddered. Let us review those three things this month so that we are ready after December 9, not reacting to it.

Who's Affected

High impact: Variable-rate borrowers and homeowners renewing in the next 12 to 18 months, who face higher payments, and holders of long-duration bond funds, who see price declines as yields rise.

Mixed impact: Retirees drawing income from fixed income, who gain higher yields on new purchases but see lower prices on existing holdings, and Canadian equity investors, who must weigh rate-sensitive sectors against energy.

Potential benefit: Savers and investors buying new GICs or short-term bonds, who can lock in the highest yields in more than a decade at the long end.

Action Checklist

Collect mortgage renewal dates and rate types for every client with a renewal before the end of 2027.

Review the duration of each client fixed income holding and note which ones would lose the most value from another 0.50 points on yields.

Review GIC maturities and consider a ladder rather than a single maturity date.

Calendar the December 9 Bank of Canada decision and the November 16 CPI release as client touchpoints.

Send the follow-up email within 48 hours.

Follow-Up Email Template

Subject: What the October 28 rate increase means for your mortgage and savings

Hi [Client Name],

The Bank of Canada raised its policy rate to 2.50% on October 28, the first increase since July 2023. The Governor said more increases could be needed, and the next decision is on December 9.

I would like to review three things with you: when your mortgage renews, how the bonds in your portfolio would respond to higher yields, and how your GIC maturities are laid out. None of this requires a decision today, but it is easier to plan before the next announcement than after it.

Please reply with a time that suits you in the next two weeks.

[Your Name]

This communication is for educational purposes only and does not constitute personalized investment advice.

🎯 Prospect ▼

Client Profiles to Target

Homeowners renewing in 2027, who are comparing lenders after the big six raised fixed rates and have not stress-tested a higher renewal payment.

Pre-retirees holding long-duration bond funds, who may not have reviewed how price sensitivity changes when yields rise.

Investors with large cash balances and maturing GICs, who face a reinvestment decision at the highest long-term yields in more than a decade.

Opening Line

Long-term government yields are at their highest in more than a decade, and the Bank of Canada just raised rates for the first time since 2023. Most investors have not looked at how their fixed income and their mortgage renewal line up with that.

Value Proposition

A rate review that connects three decisions that are usually handled separately: the mortgage renewal date, the duration of the bond holdings, and the GIC maturity ladder, all timed before the December 9 Bank decision.

Discovery Questions

When does your mortgage renew, and is it fixed or variable?

Do you know the average maturity of the bonds or bond funds you hold?

When do your GICs mature, and what happens to the money at that point?

How would another 0.50 points on yields change what you plan to do?

Who reviews these three items together today?

Prospecting Email Template

Subject: Three decisions the October 28 rate increase puts on the calendar

Hi [Name],

The Bank of Canada raised its policy rate to 2.50% on October 28, and long-term government yields are at their highest in more than a decade. That affects three decisions that are often handled separately: your mortgage renewal, the bonds in your portfolio and your GIC maturities.

I help clients line those up before the next Bank decision on December 9. If a short conversation would be useful, reply with a time that suits you.

[Your Name]

This communication is for educational purposes only and does not constitute personalized investment advice.