Bank of Canada says more rate hikes may be needed

The Bank of Canada’s governing council says further interest rate hikes might be needed, while stressing it will move carefully, according to a summary of its deliberations released Tuesday, Nov. 10.

The summary covers the central bank’s Oct. 28 decision, when it raised its policy rate by a quarter of a percentage point to 2.5 per cent. That was the first hike since 2023, as we reported at the time. The Canadian Press reported that council members acknowledged considerable uncertainty and said they will take decisions one meeting at a time.

The bank’s outlook, as reported by the Canadian Press, has annual inflation reaching 3.5 per cent at the end of 2026 and staying above three per cent for much of 2027. That is well above the bank’s two per cent target, which the bank and Ottawa renewed earlier this month through 2031 (our earlier story).

According to the summary, higher costs have largely not yet been passed on to consumers. The bank’s own surveys suggest, however, that businesses expect to raise some prices over the next year. That gap is one reason council members see a risk that a temporary price shock could turn into broader, more persistent inflation.

The council also addressed the role of monetary policy in the face of high energy prices. As described by the Canadian Press, the members noted that interest rates cannot lower global energy prices. What the bank can do, the summary says, is keep high oil prices from feeding into generalized inflation. Reducing the risk that an energy price spike becomes persistent is the main aim of the October hike.

The language matters for borrowers and savers because it signals the bank has not ruled out another increase. Households with variable-rate mortgages or lines of credit, and homeowners whose fixed terms come up for renewal, will be watching closely. Our coverage of the October housing figures shows the effect of higher rates on a cooling market, including falling sales, prices and starts.

The summary does not commit the bank to any specific path. The council said it will decide each announcement on the incoming data, including inflation readings, how quickly businesses pass on costs, and developments in the energy market. The bank’s next rate announcement is scheduled for Dec. 9, and the next consumer price index release is due Nov. 16, both listed in our Money Week calendar.

The Bank of Canada publishes a summary of governing council deliberations about two weeks after each rate decision. The full document is available on the bank’s website. The Canadian Press story was published by BNN Bloomberg on Nov. 10.