Bank of Canada Raises Interest Rate as Inflation Projected to Worsen

By Judy Trinh for CTV News

Updated: October 28, 2026 at 10:34a.m. EDT

OTTAWA — OTTAWA - The Bank of Canada raised its policy interest rate by 25 basis points to 2.5 per cent. It’s the first hike since July 2023. The central bank wants to control inflation by reducing the risk that high fuel prices could spill over and seep into the overall economy.

In its October Monetary Policy Report, the BOC said the rise in energy prices and uncertainty surrounding Canada’s trade relationship with the United States are the two biggest risks to increasing costs of living.

In its report, the BOC said that high energy costs have not yet spread broadly to other prices, but “cost pressures are building and that businesses anticipate passing on more of their increased costs to customers.”

Inflation is currently at 3.1 per cent.

Tiff Macklem, the central bank’s governor, said that the outlook for inflation has “deteriorated” since the BOC’s July report.

“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,” Macklem said in prepared remarks during a Wednesday morning news conference.

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