Key facts
- Bank of Canada expected to hike rate by 25 basis points to 2.5% on Wednesday.
- This would be the first rate increase since mid-2023.
- Annual inflation in Canada rose to 3.1% in September, largely due to energy costs.
- Economists expect one more rate hike before March.
- The Bank of Canada will release its Monetary Policy Report with revised inflation forecasts.
The Bank of Canada is widely anticipated to raise its key interest rate by 25 basis points to 2.5% on Wednesday, marking its first hike since mid-2023. This move is seen by most economists as a necessary measure against the potential spillover of energy inflation. Nineteen out of 34 economists polled by Reuters expect the quarter-point increase, with a majority also forecasting another hike before March. Annual inflation reached 3.1% in September, primarily driven by energy costs, while core inflation eased below the bank's 2% target midpoint. BoC Governor Tiff Macklem has expressed wariness about sustained high crude oil prices and their broadening impact. Money markets are pricing in a 77% chance of the hike. The central bank will also release its Monetary Policy Report, expected to include upward revisions to its inflation forecast.