# Bank of Canada Increases Overnight Rate to 2.5 Percent Policy shift aims to curb inflation amid persistent energy price pressures and global uncertainty. - **Source:** [Financial Post - Top Stories](https://financialpost.com/) - **Published:** 2026-10-28 - **Topic:** [Finance](https://brifing.si/c/finance) - **Original article:** - **On Brifing:** https://brifing.si/s/d9ad3b2d-feb3-410a-a0b2-305f91215326 ## Policy Rate Adjustment Details The Bank of Canada has officially increased its target for the overnight rate by 25 basis points, reaching 2.5 percent. Consequently, the Bank Rate is now set at 2.75 percent, while the deposit rate stands at 2.45 percent. This decision reflects a strategic move to manage ongoing economic resilience and rising inflationary pressures. ## Global Economic Performance Drivers Global economic activity remains resilient despite elevated energy prices. The United States economy continues to grow at a robust pace, fueled by consumer spending and significant AI-related investments. Meanwhile, the euro area shows broad-based resilience, and Chinese growth rebounded in the third quarter, supported by increased exports and active fiscal spending measures. ## Canadian GDP Growth Trends Canada experienced a growth pickup mid-year, with GDP expanding by 3.3 percent in the second quarter. Recent indicators suggest a two percent growth rate for the third quarter, exceeding previous July projections. This performance is driven by solid consumer spending and a rebound in business investment, particularly within the oil and gas sector. ## Inflation and Cost Pressures CPI inflation has hovered around three percent since April and is projected to reach 3.5 percent by year-end. While core inflation remains near two percent, rising fuel prices are increasing production and transportation costs. Bank surveys indicate that businesses are likely to pass these higher input costs to consumers over the coming year. ## Impact of Trade Uncertainties The Canadian economy faces headwinds from U.S. tariffs, which are expected to slow growth in the fourth quarter of 2026. Despite these trade tensions, exports have strengthened due to robust U.S. demand. Future projections remain sensitive to the evolving Canada-U.S. trade relationship, which introduces considerable uncertainty into the bank's current economic forecast. ## Labor Market and Supply The unemployment rate has remained steady at approximately 6.5 percent for several consecutive months. Despite this stability, a broad set of economic indicators continues to point toward some excess supply within the Canadian economy. This slack suggests that while demand is present, the economy is not currently overheating in the labor sector. ## Geopolitical and Energy Risks The ongoing conflict in the Middle East, now in its eighth month, remains a primary source of global uncertainty. Combined with persistently high energy prices, this situation contributes to the persistence of inflation. The Bank of Canada is closely monitoring how these external factors influence domestic price stability and long-term inflation expectations. ## Future Monetary Policy Outlook The Governing Council decided to raise rates to prevent high energy costs from spreading to other goods and services. While further increases may be necessary, the Bank intends to proceed carefully given existing uncertainties. The primary goal remains maintaining public confidence in price stability while navigating the complex global economic landscape ahead. ## Sources covering this story - https://financialpost.com/news/economy/bank-of-canada-raises-interest-rates-official-statement-oct-28 — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._