Why is the Bank of Canada’s interest rate decision trending?
The bank is considering a rate hike to stop high oil prices from causing broader inflation. While overall inflation rose to 3.1% in September, there is debate over whether to raise rates given that non-energy inflation has actually slowed.
What happened
- 17 Oct
Governor Tiff Macklem suggests inflation may drift up if oil stays around US$100 [1].
- 24 Oct
Brent Crude oil hits a six-month high of US$116 [1].
- 28 Oct
The Bank of Canada is scheduled to announce its interest rate decision [1], [3].
What you need to know
The current policy rate has been steady at 2.25% since October 2025 [1], [3].
Gasoline prices increased by 27.8% in September compared to the previous year [3].
A rate hike would immediately impact variable-rate mortgages and lines of credit [3].
Core inflation, which excludes volatile items like gas, remains lower at around 1.8% to 1.9% [3].
It is not confirmed if the bank will prioritize headline inflation or core inflation and job losses in its final decision [3].
Background
The Bank of Canada is balancing several economic pressures, including a slump in the housing market, elevated unemployment, and potential U.S. tariffs on the auto sector [1].
Global energy shocks caused by the war in the Middle East and the closure of the Strait of Hormuz have driven oil prices higher [1].
Other central banks, such as the U.S. Federal Reserve, recently raised rates in response to similar energy price increases [1].
Questions people ask
Will a rate hike affect my fixed-rate mortgage?
No, fixed mortgage rates are tied to Government of Canada bond yields rather than the Bank of Canada rate [2].
Why is inflation rising if grocery prices are slowing?
While grocery price growth slowed to 1.7%, massive jumps in gasoline and home heating fuels pushed the total inflation rate to 3.1% [3].
Where this came from
[1] theglobeandmail.com
BoC expected to raise benchmark rate for first time in three years as oil shock persists
Preview image from theglobeandmail.com
[2] globalnews.ca
Bank of Canada expected to raise rates next week, some economists say
Preview image from globalnews.ca
[3] ca.finance.yahoo.com
Canada's inflation jumps to 3.1% as gas surges 28%, putting a Bank of Canada rate hike back on the table
Preview image from ca.finance.yahoo.com
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