Mortgage Blog
Bank of Canada Rate Announcement - October 28, 2026
October 28, 2026 | Posted by: Crescent Mortgage Corp.
For the first time since July 2023, the BoC increased its target for the overnight rate by 25 basis points to 2.5% and said further increases might be necessary to prevent soaring energy costs from fuelling broader inflation.
GDP growth in Canada was 3.3% in the second quarter, and recent it is expected that it will come in around 2% for the third quarter. This is stronger than was expected in the BoC’s July Report. Consumer spending has remained solid despite slowing population growth. Business investment has rebounded thanks to oil and gas sector activity. Exports overall have strengthened as a result of robust US demand, higher energy production and businesses adapting to the ever-changing trade environment. The unemployment rate has remained consistent at 6.5% for several months.
Economic growth is expected to slow in the fourth quarter due to new US tariffs before rebounding in 2027 as a result of increased business investment and fiscal measures. However consumption growth is expected to slow and the housing market will remain relatively weak. Currently the Canadian economy is forecast to grow by 1% this year, and by 2% in 2027 and 2028.
Given persistently high oil prices, CPI inflation has hovered around 3% since the spring and is predicted to hit 3.5% by the end of 2026. Stripping out gasoline, inflation was 2.2% in September and core inflation measures remain about 2%. However cost pressures are building as high fuel prices increase the cost of both production and transportation. To this point businesses have absorbed most of these input costs, but the expectation is that we will see more of them passed along to the consumer over the next year. CPI inflation is expected to average 3% in 2027 and then drop to 2% by the middle of 2028.
“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,” Governor Tiff Macklem said in opening remarks to reporters.
“There could be a need to increase the policy rate further, but given uncertainties, we will proceed carefully.”
The next interest rate announcement is scheduled for December 9, 2026.