The Bank of Canada Raised Its Rate to 2.5%. Who Pays More?

On October 28, the Bank of Canada raised its overnight-rate target by 25 basis points to 2.5%. The Bank Rate is 2.75%, and the deposit rate is 2.45%. Governor Tiff Macklem said it was the first increase since July 2023. This is the decision itself, not another set of odds about whether the scheduled announcement would produce one.

The Bank tied the move to energy. It said consumer-price inflation has been around 3% since April and is expected to reach about 3.5% by the end of 2026. Inflation excluding gasoline was 2.2% in September, and core measures remain close to 2%. Businesses have mostly absorbed higher fuel and import costs so far, but Bank surveys suggest more of those costs will be passed on over the next year. Inflation is projected to average 3% in 2027.

A higher policy rate can reprice variable-rate borrowing and new loan offers. It does not rewrite a fixed-rate mortgage already signed. The unemployment rate has been around 6.5%, and the Bank still sees some excess supply. It also expects fourth-quarter growth to slow because of new U.S. tariffs. No retail gasoline or grocery cut was announced with the hike.

Would this October 28 hike change a Canadian mortgage payment immediately? Not one that is already fixed. The overnight target is now 2.5%. Variable-rate loans can reprice with the policy rate, while an existing fixed payment stays at its contract rate.