Bank of Canada Poised to Raise Rates to 2.50% on October 28 as Economists Reverse Course on Inflation

OTTAWA, October 24, 2026 — The Bank of Canada is now expected to raise its benchmark interest rate by a quarter point to 2.50% on October 28, its first move in a year, after a Reuters poll of economists reversed course in a matter of weeks as inflation expectations climbed and the central bank's governor signalled that a hike is coming.

Illustration: A concept illustration of a central bank weighing an interest-rate decision as inflation expectations climb.

What Happened

Nineteen of 34 economists surveyed by Reuters in a poll conducted October 21–23 said the Bank of Canada will lift its overnight rate by 25 basis points to 2.50% at its October 28 meeting, according to the poll published on October 23. The result marks a sharp turnaround from the previous Reuters poll, in which 80% of respondents expected the bank to hold its rate at 2.25% until the end of 2026, and two-thirds expected no move until the end of March 2027.

The shift was driven by a run of signals that inflation pressures are building again. Inflation rose to 3.1% in September, only just above the Bank of Canada's target range of 1% to 3%, but the bank's latest business outlook survey showed inflation expectations rising sharply in the run-up to a recent breakdown in trade talks with the United States, Canada's main export destination. Governor Tiff Macklem told reporters in remarks on Saturday that the bank's quarterly inflation forecasts, also due next week, are likely to be revised higher — comments markets read as a hint that a rate rise is coming.

Interest-rate futures have moved accordingly, from pricing in only a 30% chance of an October hike to around a three-in-four likelihood, Reuters reported. Many economists changed their view from a hold to a hike during the week, citing Macklem's remarks. "What changed the tone in the governor's public comments on the weekend and what changed our view on Monday is the same source, and that is the responses from the BoC's business outlook and consumer surveys," Royce Mendes, managing director and head of macro strategy at Desjardins, told Reuters. "The survey responses... suggest there are more serious inflationary pressures coming."

Sixteen of 29 economists in the poll, a 55% majority, also forecast one more increase before March 2027, after which policymakers would hold the overnight rate at 2.75%, according to poll medians. If that path is followed, Reuters noted, it would be the shortest Bank of Canada tightening campaign in 30 years.

Illustration: A concept illustration of surging oil prices feeding into inflation and market volatility.

Background

The Bank of Canada is not moving in isolation. It is joining a widening group of central banks that have turned back toward tighter monetary policy in response to persistent inflation emerging from the US-led war with Iran that began in February 2026, Reuters reported. The conflict led to the effective closure of the Strait of Hormuz for a period, through which roughly one-fifth of global energy supplies used to flow, and oil prices surged — hitting $117 a barrel on Friday for the first time since May, according to the Reuters poll report.

Among major central banks, only the Bank of Canada and the Bank of England had not yet begun to raise rates in this cycle, Reuters noted. The Bank of England is widely expected to raise rates at its early November meeting, after jobs data pointed to a bottoming in the labour market and reinforced the case for a hike. In Australia, Reserve Bank Deputy Governor Andrew Hauser said this week that tighter policy is working to slow the economy but the inflation outlook has worsened, leaving him unsure whether rates must rise further; the Reserve Bank meets on November 3 to decide whether to raise its 4.60% cash rate for a fifth time this year. Indonesia's central bank, Bank Indonesia, held its benchmark rate at 5.75% on October 21 but raised its overnight deposit facility rate by 25 basis points to 5.00% as the rupiah hovered near an all-time low and the stock market suffered a record-breaking two-day rout.

Canada's own economy complicates the decision. Growth likely slowed to 1.9% last quarter from 3.3% in the second quarter of 2026, and is forecast at 1.3% in the current quarter before accelerating next year, according to poll medians. The economy is expected to grow 1.0% in 2026 and 1.7% in 2027, while inflation is forecast to average 2.8% for 2026 as a whole, falling to 2.3% in 2027. Economists who forecast no move next week mainly cited a weak economy and subdued inflation pressures despite soaring oil prices, Reuters reported — a reminder that the decision is far from unanimous.

Benjamin Reitzes, Canadian rates and macro strategist at BMO, captured the central bank's dilemma in comments to Reuters: "They'd rather make the mistake of hiking a little bit too early, which means maybe they have to hike a little bit less at the end of the day than falling behind the curve, which is what happened in 2021-2022, and they don't want to repeat that mistake."

Why It Matters

A Bank of Canada hike would ripple far beyond Ottawa. Higher Canadian rates would raise borrowing costs for households carrying mortgages and for businesses financing investment, at a moment when growth is already cooling. For a country deeply tied to the United States through trade, the move would also affect the Canadian dollar and the competitiveness of Canadian exports, especially while trade talks with Washington remain strained.

For global markets, the poll matters because it confirms a broader regime change. Barely weeks ago, the consensus was that major central banks were done tightening; now, one by one, they are being pulled back toward rate rises by energy-driven inflation. If Canada hikes on October 28 and the Bank of England follows in early November, only a handful of major central banks will still be on hold — a synchronised tightening that could slow global growth just as the world economy absorbs the shock of war-related energy disruption.

The episode is also a case study in how fast consensus can flip. The same economists who expected no move until 2027 changed their minds within days on the strength of one survey and a few sentences from the governor. That speed underscores how much weight markets and forecasters now place on inflation expectations themselves: once businesses and consumers start expecting higher prices, central banks feel compelled to act before those expectations become self-fulfilling.

Illustration: A concept illustration of households facing higher mortgage and living costs as rates rise.

What Happens Next

All eyes turn to October 28, when the Bank of Canada announces its decision alongside its quarterly Monetary Policy Report, including the revised inflation forecasts Macklem flagged. A 25-basis-point hike to 2.50% would confirm the poll's majority view; a hold would surprise markets now pricing in a roughly three-in-four chance of a move, and would likely weaken the Canadian dollar.

Beyond October, the poll points to one further rise before the end of March 2027, taking the rate to 2.75%, followed by a hold — a short, sharp campaign rather than a long tightening cycle. Whether that path holds will depend on whether inflation expectations cool once the immediate energy shock fades, and on whether the economy's slowdown deepens. The Bank of England's early November decision and the Reserve Bank of Australia's November 3 meeting will provide the next clues about how far this global turn toward tighter policy will run.

Sponsored: explore today's featured sponsored offers

FAQ

When will the Bank of Canada announce its rate decision?

The Bank of Canada is scheduled to announce its decision on October 28, 2026, alongside its quarterly Monetary Policy Report with updated inflation forecasts.

How much of a hike do economists expect?

A majority of economists in the Reuters October 21–23 poll — 19 of 34 — expect a 25-basis-point increase, taking the overnight rate from 2.25% to 2.50%.

Why did forecasters change their minds so quickly?

The bank's business outlook survey showed sharply rising inflation expectations, and Governor Tiff Macklem signalled that quarterly inflation forecasts would likely be revised higher — comments markets read as a hint of an imminent hike.

Will there be more hikes after October?

According to the poll, 16 of 29 economists expect one more rise before March 2027, taking the rate to 2.75%, after which policymakers would hold — which would make it the shortest tightening campaign in 30 years.

How does Canada's decision fit into the global picture?

Canada and the Bank of England were the last major central banks yet to raise rates in this inflation cycle; the Bank of England is widely expected to hike in early November, while Australia and Indonesia have already tightened or signalled further moves.

Sources

• Reuters — "POLL: Bank of Canada to raise rates to 2.50% on October 28 and once again by end-March" — October 23, 2026
• Reuters — "Sterling rises as strong labour market data reinforces rate hike bets" — October 20, 2026
• Reuters — "Australia central banker says policy working, inflation outlook worse" — October 20, 2026
• Reuters — "Indonesia's central bank keeps main rate unchanged, hikes deposit facility rate" — October 21, 2026