Bank of Canada raises key interest rate, says another hike possible
TLT•The Bank of Canada raised its policy rate by 25 basis points to 2.5% and said further increases may be needed. It raised its 2027 inflation forecast to 3.1% from 2.0% and forecast 1.0% growth this year, up from 0.7%.
1. Rate decision
The Bank of Canada raised its key policy rate by 25 basis points to 2.5%, its first hike since July 2023. Governor Tiff Macklem said further increases may be needed to limit the risk that elevated energy costs spread into broader inflation, but the bank would proceed carefully.
2. Inflation outlook
The bank raised its 2027 inflation forecast to 3.1% from 2.0% in July and expects inflation to end this year at 3.5%, remain around 3% for most of next year, and return close to its 2% target by mid-2028. Annual inflation was 3.2% in September, above the bank’s 1%-3% target range.
3. Growth projections
The bank forecast growth of 1.0% this year, up from 0.7% in July, and upgraded its forecasts for 2027 and 2028 to 2% from 1.8% for each year. It projected growth would slow from an annualized 3.3% in the second quarter to 0.8% in the fourth quarter.
