BoC Rate Announcement Oct 28, 2026
For the first time since July 2023, the Bank of Canada has increased its policy rate by 0.25% bringing it up to 2.50%. Why? Headline inflation ticked up to 3.1% in September, from 3% in August, which is a direct impact of the war in the Middle East. With the Central Bank’s target inflation being under 3%, this latest measure is of concern to the BoC, the increase.
Increasing the policy interest rate is the only tool the Bank of Canada has to attempt to combat inflation. So, even though our GDP and employment numbers are weak, the fear is that perpetual inflation will do more harm in the longer term than a rate hike will. For context, Canada was the last Central Bank around the world to increase the key lending rate since the war broke out. However, not every country has been experiencing an aggressive trade war and excessive tariffs from their largest trading partner. This is not an overly popular move, and the Bank of Canada is getting some criticism, with arguments stating that this increase is not going to get oil moving through the Strait of Hormuz and it’s only going to make life even less affordable for Canadians.
Lenders add 2.20% to the BoC’s 2.50% rate, making the Prime lending rate 4.70%. What does this mean for non-Fixed rate mortgage holders? There is an important distinction I’d like to address. Adjustable rate mortgage payments fluctuate with the Prime rate and these will increase by approximately $13/month for every $100,000 owed. While Variable rate mortgage payments won’t change, the amount of principal paid with each payments will decrease, so it is advisable to voluntarily increase your mortgage payment in order to keep your amortization on track.
The US Central Bank meets today at 2pm EST and no change is expected there.
Canada’s last interest rate announcement for 2026 will occur on December 9th and as of now, another increase is not guaranteed. There will be some key data released ahead of then, including the GDP numbers this Friday, Employment data on November 6th and the October inflation data will be announced on November 16th. All of these key data points will be of interest as they will help set the stage for the rate environment we will see as we round out the year and head into 2027.
It’s important to realize that today’s increase is not signalling the beginning of a wave of jumbo or perpetual rate hikes like we saw post COVID. Back when that started in 2022, we were in a rock-bottom emergency rate environment (the BoC’s policy rate was at 0.25%), the economy was overly active due to pent up demand and supply chain issues wreaked havoc on inflation, which skyrocketed quickly. By comparison, back in March 2022 when the series of hikes began, inflation was already sitting at 5.70%.
I often say that my crystal ball is still on backorder, and while no one can predict what’s in store, I am certain that we don’t need to panic. If you are concerned about your specific situation, reach out to me anytime and we can strategize together.
