Bank of Canada raises its policy rate to 2.5%

The Bank of Canada raised its target for the overnight rate by 25 basis points to 2.5%, its first increase since 2023. It said consumer-price inflation has been around 3% since April and is expected to rise to about 3.5% by the end of the year, driven by oil prices and refinery margins, while inflation excluding petrol was 2.2% in September.

The bank said its surveys point to more pass-through of higher costs over the next year and that near-term inflation expectations have risen. It now expects the economy to grow 1% in 2026 and 2% in 2027 and 2028.