The Bank of Canada decided to raise its target overnight interest rate by 25 basis points to 2.5%, as expected, for the first time since 2023. This decision was announced at its meeting earlier today, Wednesday, October 28th. The rate now stands at 2.75% for banks and 2.45% for deposits.

The report stated that since the release of the Monetary Policy Report in July, global economic activity has remained strong. Despite rising energy prices, the economy continues to grow at a robust pace, with GDP increasing by 3.3% in the second quarter. Recent indicators point to growth of approximately 2% in the third quarter.

With oil prices rising, inflation, as measured by the Consumer Price Index (CPI), has remained at 3% since April and is expected to rise to around 3.5% by the end of the year. The core CPI, which excludes gasoline prices, rose by 2.2% in September and remains close to 2%. Under these circumstances, the Bank considered it appropriate to raise the interest rate to mitigate the risk of the continued rise in energy prices spreading widely to the prices of recent goods and services. However, given the uncertain conditions, the Board of Directors agreed to exercise caution and the Bank reaffirms its commitment to maintaining Canadians’ confidence in price stability.