The Bank of Canada has raised its key policy rate by 0.25 percentage points to 2.5%, its first increase since July 2023, as rising energy costs push inflation higher and prompt an upward revision to its 2027 inflation forecast.
The Bank of Canada raised its key policy rate by 0.25 percentage points on 28 October 2026. The rate now stands at 2.5%. Markets had widely expected the move, which marks the first increase since July 2023.
The key policy rate is applied to calculate interest and penalties on late tax payments.
The bank now forecasts inflation of 3.1% for 2027, up from the 2.0% it predicted in July. Annual inflation reached 3.2% in September, above the bank’s target range of 1 to 3%. Higher energy and transport costs drove most of that rise.
Governor Tiff Macklem said the bank expects inflation to finish 2026 at 3.5%. It should stay near 3% for most of 2027 before returning close to the 2% target by mid 2028. The bank raised the rate to stop energy costs from spreading into broader price increases.
Macklem said the rate could rise again, but the bank will move carefully. No fixed path has been set. The current rate remains slightly below the neutral level, which the bank places at 2.75%.
The bank’s next rate decision is set for 9 December 2026.
