Verified October 28, 2026. Decision details from the Bank of Canada, inflation data from Statistics Canada, and reaction and forecast details as reported by BNN Bloomberg, CP24, Canadian Mortgage Professional, TD Stories and Reuters. Bank prime rates had not been announced when this was written.
The short answer: The Bank of Canada raised its policy rate by a quarter point to 2.50 per cent on October 28, 2026, its first increase since July 2023. The reason is energy. Gasoline prices were up 27.8 per cent from a year earlier in September, pushing headline inflation to 3.1 per cent, and the Bank now expects inflation to stay around 3 per cent through most of 2027. It does not expect to get back to its 2 per cent target until around the middle of 2028. If you have a variable-rate mortgage or a line of credit, expect your rate to rise by 0.25 points once the banks move their prime rates. Fixed-rate mortgages already in place do not change.
What the Bank decided
The Bank announced the decision at 9:45 a.m. Eastern time on Wednesday, October 28, alongside its October Monetary Policy Report. It raised all three of its key rates by 25 basis points.
| Rate | Before | After |
|---|---|---|
| Target for the overnight rate (policy rate) | 2.25% | 2.50% |
| Bank Rate | 2.50% | 2.75% |
| Deposit rate | 2.20% | 2.45% |
The increase was widely expected. A Reuters poll of economists published on October 23 had forecast a hike to 2.50 per cent at this meeting. It is the Bank’s first rate move in about a year and its first increase since July 2023, at the end of the last hiking cycle. Even after the hike, the Bank describes the rate as below the neutral range, the level that neither holds the economy back nor pushes it forward.
Why it raised rates
This hike is about energy prices and the risk that they spread. Statistics Canada reported on October 19 that the Consumer Price Index rose 3.1 per cent in the year to September, up from 3.0 per cent in August. Gasoline was the main driver, up 27.8 per cent from a year earlier after a 22.8 per cent rise in August. Statistics Canada linked the increase to higher crude oil prices amid ongoing uncertainty about the wars in the Middle East.
Outside gasoline, inflation was much calmer:
| Measure | Year over year |
|---|---|
| All items (headline CPI) | 3.1% |
| All items excluding gasoline | 2.2% |
| Gasoline | 27.8% |
| Shelter | 1.8% |
| Rent | 2.8% |
| Mortgage interest cost | -0.2% |
| Food purchased from stores | 1.7% |
The Bank’s core inflation measures, which strip out the most volatile prices, were close to 2 per cent. That is why several economists argued for waiting. The Bank’s answer is that the longer energy stays expensive, the more it feeds into everything else, from delivery costs to airfares to the price of goods on store shelves. It noted that about 60 per cent of consumer-facing businesses it surveyed expect to pass higher costs on to customers within 12 months. CP24 reported that Brent crude averaged $124.96 US a barrel in October, about $35 above its level in July.
Governor Tiff Macklem put it this way at the news conference:
“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.”
He also said: “The longer energy prices remain high, the more likely it is these costs will spill over to consumer prices more broadly.” The Bank said Governing Council agreed “that risks to inflation had increased and there was less scope for monetary accommodation.” TD reported that the Bank said it “does not see a clear offramp” to the Middle East conflict.
The new forecasts
The October Monetary Policy Report raised the inflation outlook sharply from July and also nudged growth higher.
| Measure | October 2026 projection | Notes |
|---|---|---|
| CPI inflation, end of 2026 | About 3.5% | Inflation has been around 3% since April |
| CPI inflation, 2027 | About 3% (3.1%) | Up from 2.0% in the July report |
| Return to 2% target | Around mid-2028 | |
| Real GDP growth, 2026 | 1.0% | Up from 0.7% in July |
| Real GDP growth, 2027 and 2028 | About 2% | Up from 1.8% in July |
| Quarterly GDP growth (annualized) | 3.3% in Q2, about 2% in Q3, 0.8% in Q4 | Q4 slowed by new US tariffs |
| Unemployment rate | Around 6.5% | For several months |
| Global GDP growth | 3.1% in 2026, 3.2% in 2027 and 2028 | Revised up |
The 2027 inflation figure of 3.1 per cent and the July comparisons are as reported by BNN Bloomberg. The Bank also noted the Canadian dollar at about 71 cents US. Two risks run in opposite directions. The Middle East conflict could end sooner than expected, which would bring oil prices and inflation down faster. On the other side, new US tariffs and the wider trade rift with the United States are expected to slow the economy in the fourth quarter.
Reaction: Ford, Queen’s Park and economists
Premier Doug Ford
Ontario Premier Doug Ford criticized the hike in a post on X on the morning of October 28, before the decision was released, calling it “a massive mistake.” He wrote:
“Higher rates won’t get oil moving through the Strait of Hormuz or lower tariffs on Canadian businesses. They will only make life more expensive for Canadian families and workers, punishing them for something they can’t control.”
Ford has criticized Bank of Canada rate hikes before, during the 2022 and 2023 cycle. His argument this time is the one many critics share: a higher Canadian interest rate does nothing about the global price of oil, but it does raise borrowing costs for households and small businesses at a time when growth is slowing.
Finance Minister Peter Bethlenfalvy
Ontario’s finance minister was more measured. Speaking to CTV News at an unrelated news conference before the decision, he said: “Who wouldn’t advocate for lower interest rates at a time when people are feeling the impacts of those higher interest rates?” He added that “keeping inflation in check is really important.”
Economists
- Earl Davis, head of fixed income and money markets at BMO Global Asset Management, called it “a pre-emptive hike” and said it was likely made too early. He said markets had been pricing in more than 100 basis points of increases and expects that to shrink to perhaps 75 (BNN Bloomberg).
- Tu Nguyen, economist at RSM Canada, described the Bank’s tone as “decidedly hawkish” and said to “expect the next rate hike as early as December, with more to follow in 2027” (BNN Bloomberg).
- Stéfane Marion of National Bank had argued before the decision that “I don’t think that the Bank of Canada should be hiking” (Canadian Mortgage Professional).
- Marc Ercolao, economist at TD, said more hikes are likely but the Bank will move carefully. A second increase would take the rate to 2.75 per cent, the middle of the Bank’s neutral range (TD Stories).
What it means for your mortgage and line of credit
Variable-rate mortgages and HELOCs
Variable mortgage rates and home equity lines of credit are priced off each lender’s prime rate. Bank prime rates were 4.45 per cent before the decision. The big banks usually move prime within a day or so of a Bank of Canada change, and a matching quarter-point move would take prime to 4.70 per cent. Check your lender’s notice for the exact rate and the date it takes effect.
How you feel it depends on your mortgage. With an adjustable-rate mortgage, the payment goes up. With a variable rate and a fixed payment, the payment stays the same, but more of it goes to interest and less to principal. Here is what a 0.25-point rise means on a typical adjustable mortgage priced at prime minus 0.50, moving from 3.95 to 4.20 per cent:
| Mortgage balance | At 3.95% | At 4.20% | Extra per month | Extra per year |
|---|---|---|---|---|
| $400,000 | $2,100 | $2,156 | $55 | $660 |
| $500,000 | $2,625 | $2,695 | $69 | $828 |
| $700,000 | $3,676 | $3,773 | $97 | $1,164 |
Estimates use monthly compounding and assume the full 0.25-point change passes through. The yearly figure is the rounded monthly increase times 12. Your lender’s figures will differ slightly.
On a line of credit at prime plus 0.50, interest-only payments rise by about $10 a month for every $50,000 owed, from about $206 to $217 on a $50,000 balance.
Fixed-rate mortgages
If you already have a fixed rate, nothing changes until renewal. New fixed rates follow bond yields rather than the overnight rate, and yields had already been rising before this hike, as we explained in why mortgage rates were rising while the Bank was on hold. Lenders may adjust posted fixed rates in the coming days depending on how bond markets react to the Bank’s signal that more hikes are possible.
If you are renewing soon
The Bank now expects inflation above target for well over a year, and some economists expect another hike in December. That makes the choice between fixed and variable harder, not easier. Our guide to fixed or variable for a fall 2026 renewal walks through the trade-offs. Ask your lender or broker about an early renewal or a rate hold, and compare offers rather than signing the first renewal letter.
The stress test
For buyers, a higher rate also means a higher qualifying rate. Under the federal stress test, insured and uninsured borrowers must qualify at the greater of their contract rate plus 2 percentage points or 5.25 per cent. A variable rate of 4.20 per cent would mean qualifying at 6.20 per cent. See how that changes your budget in our mortgage stress test guide.
Savings
The upside is for savers. High-interest savings accounts and short-term GICs tend to move with the overnight rate, so returns on cash may tick up.
What it means for GTA buyers and sellers
The GTA market was already soft before this decision. TRREB’s MLS Home Price Index benchmark for the GTA was $917,600 in September 2026, and the average condo apartment price was down 7.7 per cent from a year earlier, the largest drop of any home type. Our September 2026 Toronto housing market report has the full figures. October results are due from TRREB in early November and will show only a few days of trading after the hike.
A quarter point on its own is a small change in monthly payments. The bigger effect may be on confidence, since the Bank has signalled that more increases are possible. Some practical steps:
- Buyers: get a pre-approval with a rate hold now if you plan to buy in the next few months, and budget for a rate at least half a point higher than today’s.
- Variable-rate owners: check whether your payment changes or only your amortization, and whether you are near your trigger rate.
- Sellers: price for the buyers who are still qualifying at higher rates. Fewer buyers may stretch to the top of their budget.
- Investors: rerun your numbers with the new rate and, for a condo, with current rents and fees.
If you are weighing a move, we can help you buy a home with a clear view of today’s rates, or start with a free home evaluation to see where your home stands.
What happens next
The Bank’s next scheduled rate announcement is Wednesday, December 9, 2026, the last of the year. Its statement said: “There could be a need to increase the policy rate further, but given uncertainties, we will proceed carefully.” The Reuters poll published before this decision expected one more increase by the end of March 2027.
Before December 9, watch three things: the October CPI release in November, monthly jobs data, and oil prices. If the Middle East conflict eases and gasoline prices fall, the case for a second hike weakens. If energy costs keep spreading into other prices, a December move becomes more likely. For our pre-decision analysis, see Bank of Canada October 28 rate decision: hike or hold?
FAQ
What is the Bank of Canada’s interest rate now?
The policy rate is 2.50 per cent after the Bank raised it by 25 basis points on October 28, 2026. The Bank Rate is 2.75 per cent and the deposit rate is 2.45 per cent. It was the first increase since July 2023.
Why did the Bank of Canada raise rates in October 2026?
Because of energy prices. Gasoline was up 27.8 per cent in the year to September and headline inflation reached 3.1 per cent. The Bank raised rates to reduce the risk that high energy prices spread to other prices, even though core inflation was close to 2 per cent.
Will my mortgage payment go up?
Only if you have a variable-rate mortgage or a line of credit. Once banks raise prime, an adjustable-rate payment rises by about $69 a month on a $500,000 mortgage with a 25-year amortization, by our estimate. Fixed-rate mortgages do not change until renewal.
What is the prime rate after the hike?
Bank prime rates were 4.45 per cent before the decision. A matching quarter-point move would take prime to 4.70 per cent. Check your lender’s announcement for the exact rate and effective date.
What did Doug Ford say about the rate hike?
Ontario Premier Doug Ford called the hike a massive mistake in a post on X on October 28, saying higher rates will not get oil moving through the Strait of Hormuz or lower tariffs and will only make life more expensive for families and workers.
When is the next Bank of Canada rate decision?
The next scheduled announcement is Wednesday, December 9, 2026. The Bank said it could need to raise the policy rate further but will proceed carefully.
Sources
- Bank of Canada, Bank of Canada raises the policy rate by 25 basis points to 2½% (October 28, 2026), Monetary Policy Report, October 2026 and opening statement
- Bank of Canada, 2026 schedule for policy interest rate announcements (December 9)
- Statistics Canada, The Daily: Consumer Price Index, September 2026 (October 19, 2026)
- BNN Bloomberg, Bank of Canada raises key interest rate, says another hike possible and expert reaction to the first rate hike since 2023 (October 28, 2026)
- CP24, ‘A massive mistake’: Ontario Premier Doug Ford blasts Bank of Canada interest rate hike and Bank of Canada raises interest rate as inflation projected to worsen (October 28, 2026)
- Canadian Mortgage Professional, Bank of Canada hikes citing ‘global upheaval’ risk to inflation (October 28, 2026)
- TD Stories, The Bank of Canada raised its interest rate on October 28
- Reuters via U.S. News, Bank of Canada to raise rates to 2.50% on October 28 and once again by end-March: Reuters poll (October 23, 2026)
- TRREB Market Watch, September 2026, via our September housing market report
- Payment and interest estimates calculated by Local Toronto with monthly compounding.
Featured image: a general view of downtown Ottawa from the Local Toronto media library. It is not the Bank of Canada building.
This article is general information, not financial or mortgage advice. Local Toronto is not a lender or mortgage broker. Speak with your lender or a licensed mortgage professional about your own situation.
Local Toronto, HomeLife Landmark Realty Inc., Brokerage.