The October 28 increase does not mean Canadian inflation is now projected to fall quickly. The Bank of Canada raised the overnight-rate target by 0.25 percentage point, from 2.25 percent to 2.50 percent. The Monetary Policy Report published the same day still projects consumer price index inflation above 3 percent through much of 2027, and close to the 2 percent target only by the middle of 2028.
That split is what matters for households, workers and businesses. The 2.50 percent figure is a completed decision. The inflation path is a projection, not evidence that prices have already cooled. The Bank says that, as of 2021, a change takes effect the day after its announcement, so the new target took effect on October 29. It is not a mortgage, card or deposit quote, and it does not by itself reset a fixed payment already written into a contract.
A quarter-point rise after a hold at 2.25 percent
The rate table shows 2.25 percent on December 10, 2025, and the same unchanged target on January 28, March 18, April 29, June 10, July 15 and September 2, 2026. October 28 is the first change in that run: 2.50 percent, up 0.25 percentage point. The Bank adjusts the overnight target on eight fixed dates a year. October 28 also brought a Monetary Policy Report. December 9, 2026, is the next date, and it is a rate announcement only. January 27, 2027, pairs a decision with another report.
The projection keeps inflation above 3 percent
The Canadian outlook says inflation remains above 3 percent through much of 2027, then eases gradually because energy and import-cost pressures take time to pass through. More precisely, CPI inflation is projected to stay above 3 percent through the third quarter of 2027, about 1 percentage point higher than in the July Report.
The path rises before it eases. Inflation increases until the first quarter of 2027 as high energy prices and non-energy import costs reach consumer prices while slack diminishes. Those pressures keep spreading, lifting inflation excluding energy and holding CPI inflation up through 2027. The move close to 2 percent is placed in the middle of 2028. Approaching 2 percent would be a slower pace of increase, not a forecast that prices fall back to their autumn 2026 level.
Energy and import costs spread over the next year
Upward pressure comes mainly through higher oil prices, which the Bank ties to a reduced global energy supply and to other forces that raise business costs. In the projection, energy costs push inflation up into early 2027. Energy-price inflation turns negative at the end of 2027, but earlier increases can continue to lift other prices as transportation and production costs move through supply chains.
Non-energy import costs stay a source of pressure through 2027. The Bank points to oil-sensitive industrial inputs, Canadian counter-tariffs and the past depreciation of the Canadian dollar. Firms initially absorbed most of these increases. They are expected to pass on an increasing share over the next 12 months as excess capacity is gradually absorbed. The Bank says that matches its business surveys and helps keep inflation elevated through 2027. Labour costs are not treated as a material source of upward pressure: they remain in line with productivity, and the labour market is close to balanced. Weaker demand from US tariffs and trade uncertainty offsets only part of the cost increase.
The report lists food, energy, goods excluding food and energy, shelter, and services excluding shelter as the major CPI pieces. The text used here ends before those pieces are quantified, so no grocery, rent or gasoline contribution is stated.
Growth improves without removing the cost pinch
GDP growth in 2026 is revised up to 1 percent, with mid-year strength partly offset by fourth-quarter weakness. It is expected to average 2 percent in 2027 and 2028, modestly above the July outlook, with slack absorbed as business investment, government spending and household spending grow and a large 2026 inventory drag fades.
Consumption growth is projected just above 2¼ percent in 2026 and around 2 percent on average afterward. Earlier rate cuts and rising financial wealth had lifted consumption per person. Ahead, higher long-term interest rates are projected to raise borrowing costs and weigh on consumption, only partly offset by income gains from past terms-of-trade improvements. Residential investment rises by slightly less than 1 percent on average in 2027 and 2028. Affordability limits, slow population growth and rising borrowing costs weigh on demand, while dearer energy and imported inputs restrain building.
Business investment is firmer, about 4 percent a year on average in 2027 and 2028, with the Productivity Mega Deduction described as lowering the cost of capital. Energy investment, artificial-intelligence adoption and Major Projects Office projects add support, but the Bank says the size and speed of the business response are uncertain. Government spending grows about 2½ percent on average. Export growth slows to around 1¼ percent in 2027 as US tariffs restrain non-commodity exports, then improves in 2028, while the path stays below the July trajectory. Import growth eases from about 3 percent in 2026 to around 2 percent in 2027 and 2028.
The rate decision and the outlook answer different questions. It is a fact that the overnight target is 2.50 percent and took effect on October 29. It is a projection, not a completed outcome, that inflation stays above 3 percent through much of 2027. Possible effects on new borrowing and construction are the channels the Bank describes. They are not a measured change in a payment a household has already fixed.
Uncertainty remains where the report says it remains: energy prices, US trade policy, and how households and businesses respond. December 9 will show whether 2.50 percent still stands. January 27, 2027, is the next report that can revise this path. The projection itself can be checked by whether inflation excluding energy stays elevated after energy-price inflation turns negative at the end of 2027.