Business 3 min read By Arthur Ellington
Bank of Canada expected to lift rate to 2.50% on October 28
A Reuters poll of economists finds a majority expect the Bank of Canada to raise its overnight rate by a quarter point on October 28 and deliver one more increase by March 2027.
Most economists surveyed by Reuters expect the Bank of Canada to raise its overnight rate by 25 basis points to 2.50% at its October 28 decision, ending a year-long hold. Nineteen of 34 economists polled between October 21 and 23 backed the move, and it would be the bank's first move in a year, according to the survey.
The poll also points to a second increase. Sixteen of 29 respondents, a 55% majority, also forecast one more rise before March 2027, after which policymakers would hold the overnight rate at 2.75%, poll medians showed. If correct, it will be the shortest BoC policy tightening campaign in 30 years. The forecast marks a sharp shift from the previous poll, in which 80% of respondents forecast the bank would hold its rate at 2.25% until the end of 2026.
The shift follows remarks from Governor Tiff Macklem. Quarterly inflation forecasts from the bank, also due next week, are likely to be revised higher, BoC Governor Tiff Macklem told reporters in remarks Saturday that markets interpreted as a hint a rate rise is coming. Interest rate futures have moved from pricing in a 30% chance of a rate hike in October to around a three-in-four likelihood. Many economists this week changed their view from a hold to a hike, citing those remarks from Macklem.
Inflation data and surveys are behind the change in tone. Inflation rose to 3.1% in September, only barely overshooting the BoC's target range of 1% to 3%. The central bank's business outlook survey, meanwhile, showed sharply rising inflation expectations in the run-up to a recent breakdown in trade talks with the United States, Canada's main export destination. Royce Mendes, managing director and head of macro strategy at Desjardins, said the survey responses suggest there are more serious inflationary pressures coming.
The wider backdrop is also shaping the outlook. Even a short series of hikes would bring the BoC into a widening group of central banks that have opted for tighter monetary policy in response to persistent inflation emerging as a result of the US-led war with Iran that began in February. Among major central banks, only the BoC and the Bank of England, which is widely expected to raise rates at its early November meeting, have not yet begun to raise rates.
The poll also projects inflation to average 2.8% for 2026 as a whole, falling to 2.3% in 2027. Economic growth is forecast to slow to 1.3% in the current quarter, following 1.9% growth last quarter, before accelerating next year. The Bank will publish its quarterly Monetary Policy Report alongside the rate decision, which will be announced on Wednesday, October 28, 2026.
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