Bank of Canada Raises Key Overnight Rate to 2.50 Percent

The Governing Council increased rates to combat the spread of energy price inflation into broader goods and services.

Updated on Oct. 28, 2026 in Economic Indicators

Bank of Canada Raises Key Overnight Rate to 2.50 Percent

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The Bank of Canada has lifted its key overnight interest rate to 2.50 percent, with the bank rate rising to 2.75 percent and the deposit rate to 2.45 percent. The move follows persistent oil price pressures that have sustained inflation near 3 percent since April 2026.

Why it matters

High energy prices have forced the central bank to tighten monetary policy to prevent inflation from becoming entrenched across the economy. Officials are attempting to balance this adjustment against expectations of slowing growth by the end of the year.

The Governing Council set the overnight rate at 2.50 percent, while Canadian GDP growth reached 3.3 percent in the second quarter of 2026. Global GDP growth for 2026 is now revised to 3.1 percent, and gold is currently trading at CAD$5,684.40 per ounce.

The players

Bank of Canada

This is the central bank of Canada, responsible for implementing monetary policy and maintaining the stability of the financial system.

Governing Council

This body is responsible for the conduct of monetary policy at the Bank of Canada and makes decisions regarding interest rate adjustments.

The details

The decision aims to mitigate the risk that energy-driven inflation spreads to other goods and services, which have seen sustained upward price pressure. While the economy grew by 3.3 percent in the second quarter, forecasts suggest growth will slow significantly in the fourth quarter as new tariffs impact activity.

April 2026: Canadian CPI inflation remained near 3 percent.
Q2 2026: The Canadian economy grew by 3.3 percent.
October 28, 2026: The Bank of Canada officially increased interest rates.
Q4 2026: Growth is expected to slow due to tariffs.
Mid-2028: Inflation is projected to return to the 2 percent target.

Macro View

The central bank's adjustment follows a pattern established by the 2 percent inflation target, marking a temporary departure from price stability. The current interest rate hike is designed to eventually steer the economy back toward the long-term 2 percent inflation target by mid-2028.

Higher overnight rates often lead to increased borrowing costs for Canadian households, affecting mortgage and loan interest rates. These measures are designed to curb cost-of-living increases, though consumers may see price sensitivity persist as inflation remains elevated.

The takeaway

Rising interest rates are the primary tool available to the central bank to combat persistent energy-driven inflation. Canadians should prepare for a period of slower economic growth as the country adjusts to these tighter financial conditions.