Bank of Canada Rate Decision: Will the BoC Hike to 2.50%?

The Bank of Canada announces its next rate decision at 13:45 UTC on Wednesday 28 October, after holding its policy rate at 2.25% for about a year. Market pricing has swung sharply toward a quarter-point rise in recent days, but economists are split, with inflation risks from high oil prices and tariffs pulling against two straight months of job losses. The outcome could move the Canadian dollar, and the Fed's own decision follows just hours later.

Bank of Canada rate decision in brief

• The Bank of Canada announces its decision and publishes its new Monetary Policy Report at 13:45 UTC on Wednesday 28 October, followed by Governor Tiff Macklem's press conference at 14:30 UTC.
• Overnight swaps implied a roughly 80% chance of a quarter-point rise to 2.50% as of 25 October, up from around 30% in mid-October. Several economists still expect a hold.
• Headline inflation rose to 3.1% in September, driven by gasoline, while the Bank's preferred core measures eased to 1.8% and 1.9%.
• Canada lost 68,000 jobs in September after a 42,000 decline in August, and unemployment rose to 6.5%.
• USD/CAD has traded in a broad 1.3900 - 1.4300 range since late September, falling from near 1.43 in mid-October to around 1.40 as hike bets built.

What is the Bank of Canada rate decision and when is it announced?

The Bank of Canada sets the target for the overnight rate, the interest rate at which major banks lend to each other for one day. Changes to it affect mortgage rates, borrowing costs and the value of the Canadian dollar, which is why the Bank of Canada rate decision is one of the most closely watched events for traders of USD/CAD and other CAD pairs.

The Bank makes eight scheduled announcements a year. The October decision is due at 13:45 UTC on Wednesday 28 October, as shown on our economic calendar. It comes with a new Monetary Policy Report, which includes updated forecasts for growth and inflation, and a press conference at 14:30 UTC.

What markets and economists expect

Expectations have moved quickly. After a weak September jobs report on 9 October, markets put the chance of an October rise at only around 20%–30%. That changed on 19 October, when the Bank's own surveys showed businesses and consumers expecting higher inflation. Overnight swaps implied a chance of a quarter-point rise to 2.50% of as much as 87% on 21–22 October, and around 80% as of 26 October.

Economists are less convinced. Several bank economists moved to forecast a rise this month, while others expect the Bank to hold and signal increases in December or early next year, and a Bloomberg survey of economists still pointed to a hold. That split means the decision itself could surprise part of the market, whichever way it goes.

Why this Bank of Canada rate decision matters now

The Bank has kept its rate at 2.25% at every meeting so far in 2026, but its tone has hardened. At its 2 September meeting it said upside risks to inflation had increased and that it was prepared to adjust policy as needed. Governor Macklem added on 16 October that the risk of inflation broadening and becoming more persistent had gone up.

The data send mixed signals. Headline inflation rose to 3.1% in September from 3.0%, slightly below the 3.2% forecast. But the Bank's preferred core measures, CPI-trim and CPI-median, eased to 1.8% and 1.9%, close to the 2% target. Excluding gasoline, inflation slowed to 2.2%.

The labour market has weakened. Employment fell by 68,000 in September after a 42,000 loss in August, and the unemployment rate rose to 6.5% from 6.4%. Our Canada unemployment rate preview covers the jobs data in more detail.

The key shift came from expectations. The Bank's third-quarter Business Outlook Survey, released on 19 October, showed firms' inflation expectations rising at all horizons after trade talks between Canada and the United States broke down, with many companies planning to pass on higher costs. Its consumer survey showed long-term inflation expectations rising too.

In simple terms: core inflation near target and job losses argue for patience, but rising inflation expectations argue for acting before price pressures spread.

How oil prices are feeding Canadian inflation

Energy is the main driver of headline inflation. Gasoline prices were 27.8% higher in September than a year earlier, and energy prices overall rose 19.0%, as crude oil climbed amid conflict in the Middle East. Brent crude has held above $100 a barrel and climbed to near six-month highs, trading broadly between $105 and $120 in the second half of October.

For Canada, oil works in two directions. As a major oil exporter, higher crude prices can support the Canadian dollar and national income. At the same time, they push up fuel costs and can feed into inflation expectations, which is the risk the Bank is now watching most closely. If energy costs start spreading into other prices, the case for higher rates strengthens.

Rising inflation expectations versus a weakening jobs market

Four things to watch on 28 October

1. The decision

A quarter-point rise to 2.50% would be the Bank's first increase since it started cutting in 2024 and would reverse its last cut, made in October 2025. A hold would surprise market pricing but not all economists.

2. The guidance

Whether the Bank signals further increases, or describes any move as a one-off adjustment, may matter more than the decision itself. Markets are already pricing additional tightening over the next year.

3. The Monetary Policy Report

New forecasts will show how long the Bank expects inflation to stay above target, how it sees growth after the tariff escalation, and whether it assumes oil prices remain elevated.

4. The Fed at 18:00 UTC

The US Federal Reserve announces its own decision just over four hours later. A more hawkish Fed could strengthen the US dollar and offset part of any gain in the Canadian dollar. Our Fed rate decision preview covers that meeting in detail.

How the Bank of Canada rate decision could move USD/CAD

Because USD/CAD shows how many Canadian dollars one US dollar buys, a falling pair means a stronger Canadian dollar. The pair rose from around 1.40 in late September to near 1.43 in early October, its highest level since April 2025, and traded between roughly 1.42 and 1.43 until mid-October. It then fell steadily as hike expectations built and oil prices rose, dropping to below 1.40 before steadying around 1.40.

USD/CAD has been trading in a broad 1.3900–1.4300 range. Reference levels traders are watching:

• 1.4300: the October high area
• 1.4134: the former consolidation area where the decline accelerated
• 1.4000: the round-number level the pair is testing
• 1.3974: the recent low area
• 1.3896: the next support below

A more hawkish outcome could strengthen the Canadian dollar and push USD/CAD toward 1.3974 and 1.3896. A more dovish outcome, such as a hold with cautious guidance, could lift the pair back toward 1.4134 and possibly 1.4300. With the Fed decision later the same day, the first move may not hold.

All levels are context markers, not entry or exit points, and should be checked against a live price feed.

Hike bets pull USD/CAD back to 1.4000

Source: TIOmarkets MT5, USDCAD H4 chart, 26 October 2026.

Three scenarios: better than expected, as expected or worse than expected

In this table, "better" means a softer, more dovish outcome than markets expect, and "worse" means a tighter, more hawkish one, from the perspective of borrowing costs. A more hawkish outcome tends to support the Canadian dollar, which means a lower USD/CAD.

Scenario thresholds are editorial guideposts, not forecasts or trading recommendations.

Two central banks in one day

The hardest reaction to read may come from the combination of decisions. A Bank of Canada rise followed by a hawkish Fed could leave USD/CAD little changed, while a Canadian hold followed by a hawkish Fed could push the pair sharply higher. Liquidity can thin around both announcements, which can widen spreads and cause slippage.

Key events to watch

• Wednesday 28 October, 13:45 UTC: Bank of Canada rate decision and Monetary Policy Report
• Wednesday 28 October, 14:30 UTC: Governor Macklem's press conference
• Wednesday 28 October, 18:00 UTC: US Federal Reserve rate decision, with the press conference at 18:30 UTC
• Thursday 29 October, 12:30 UTC: US PCE inflation and third-quarter GDP
• Tuesday 3 November: US midterm elections, which could shape trade policy toward Canada
• Friday 6 November, 13:30 UTC: Canadian and US jobs reports for October
• Wednesday 9 December: the next Bank of Canada rate decision

Risks and uncertainties

With market pricing and economists divided, any outcome could surprise part of the market. Oil prices remain highly sensitive to developments in the Middle East, and trade tensions with the United States could change the growth and inflation outlook quickly. The Fed decision on the same day adds another source of volatility for USD/CAD.

Market direction is not mechanical. Positioning, liquidity and global risk sentiment can outweigh the usual relationship between central-bank signals and currencies, and prices can gap or reverse rapidly around the announcements.

Conclusion

The Bank of Canada rate decision on 28 October is finely balanced. Rising inflation expectations, high oil prices and new tariffs argue for a first rate rise since the Bank began cutting, while job losses and core inflation near target argue for patience. With a rise largely priced in, the guidance and the new forecasts may move the Canadian dollar more than the decision itself, and the Fed's announcement later the same day could reinforce or reverse that first reaction.