Bank of Canada Hikes to 2.5% and Leaves the Door Open to More

The Bank of Canada raised its policy rate by 25 basis points to 2.5% on Wednesday, Oct. 28, and said it may need to go higher.

The move lifts the Bank Rate to 2.75% and the deposit rate to 2.45%, according to the central bank's release. Governing Council said it acted "to reduce the risk that continuing high energy prices spread broadly to the prices of other goods and services."

Why the bank moved

CPI inflation has run around 3% since April and should reach about 3½% by year-end, the bank said. It now expects inflation to average 3% in 2027, a percentage point above its July projection, before easing to 2% by mid-2028. It pointed to higher-for-longer energy prices tied to the Middle East conflict, now in its eighth month, and to companies passing more costs on to customers.

The other side of the ledger is softer. Inflation excluding gasoline was 2.2% in September, core measures sit near 2%, and unemployment is around 6½%. The bank forecasts growth of 1% this year and 2% in 2027 and 2028.

What comes next

"There could be a need to increase the policy rate further, but given uncertainties, Governing Council agreed to proceed carefully," the bank said. Reuters reported the decision the same way, as leaving another hike possible. The next rate announcement is Dec. 9.

The decision lands hours before the Federal Reserve's 2 p.m. ET announcement. Bitcoin traded at $80,440 at 11:59 a.m. ET, down 0.1% over 24 hours, according to CoinGecko.

In our opinion: The hike made the headline, but the scoop is in the fine print, where "proceed carefully" is central-bank speak for "don't count on a quiet December."