On Oct. 28, 2026, the Bank of Canada raised its target for the overnight rate by a quarter of a percentage point to 2.5%, saying lasting energy-price pressures and a strong economy had raised the risk that inflation would spread more widely.
The increase was the Bank’s first rate rise since July 2023. It followed seven straight decisions to keep the rate unchanged. The target had been 2.25% since October 2025.
Officials pointed to persistently high oil prices and refinery costs, which have kept consumer inflation near 3% since April. The Bank expects inflation to rise to about 3.5% by the end of this year. Its preferred measures of ongoing inflation remain close to 2%.
The Bank warned that businesses facing higher fuel and other costs may pass more of those expenses on to customers. This could extend price increases beyond energy. Economic growth picked up more than expected in the middle of the year.
The Bank still sees uncertainty from U.S. tariffs and some extra supply in Canada’s economy. The Bank said it may need to raise rates further. It will move carefully as it weighs the risk that inflation will stay high against the effect of higher borrowing costs on households and businesses.