Bank of Canada raises policy rate to 2.5 per cent, first increase since 2023
The central bank cited oil-driven inflation risk and said more hikes remain possible.
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The Bank of Canada raised its policy interest rate by a quarter point to 2.5 per cent on Wednesday, its first increase in more than three years and the end of a year spent holding at 2.25 per cent.
The central bank pointed to the prolonged Middle East conflict, which has kept oil prices high and raised production and transportation costs. Businesses have largely absorbed those increases so far, but the bank's surveys suggest more will be passed on to consumers over the coming year.
Inflation is projected to reach about 3.5 per cent by the end of 2026 and average three per cent in 2027 before returning to the two per cent target in mid-2028. Governor Tiff Macklem said further increases remain possible, and the next scheduled announcements are Dec. 9, Jan. 27 and March 3.
