Minutes show Governing Council accepted the risk of acting, fearing entrenched inflation more than a hike
The Bank of Canada’s Governing Council moved forward with its first interest rate increase since July 2023 despite deep uncertainty about global energy markets and Canada-US trade relations, according to deliberation minutes of the bank’s October 28 policy meeting.
The minutes covered discussions between October 20 and October 28 among Governor Tiff Macklem, Senior Deputy Governor Carolyn Rogers and four deputy governors.
The council considered two options — holding the policy rate at 2.25% or lifting it to 2.5% — before concluding the balance of risk had tilted toward action.
“They recognized that uncertainty did not mean inaction, but they agreed they would need to proceed carefully to assess how economic developments would affect their outlook,” the minutes stated.
Canada’s labour market shed 4,700 jobs in October, pushing the national unemployment rate to 6.7% from 6.5%, a third consecutive month of deterioration that is now complicating the Bank of Canada’s (BoC) path to a December rate hike. https://t.co/M8Ce4IYrjH
— Canadian Mortgage Professional Magazine (@CMPmagazine) November 10, 2026
Energy shock sharpens the inflation outlook
An eight-month-old conflict in the Middle East had pushed the benchmark price of crude oil approximately US$35 higher per barrel than assumed in the Bank’s July Monetary Policy Report. The minutes show this was the dominant pressure point in Governing Council’s deliberations.
“With the war in its eighth month and no resolution on the horizon, members exchanged views on whether a higher policy interest rate was needed to mitigate the risk that higher energy costs would spread to other goods and services,” the minutes stated.
Canada’s annual inflation rate reached 3.2% in September, according to Statistics Canada, driven almost entirely by higher energy and transportation costs.
Core inflation remained near 2%, but council members warned the buffer was narrowing.
“Cost pressures were building and would eventually be reflected in core measures as these costs make their way into consumer prices,” the minutes stated, adding that even without further pass-through, “the energy shock alone would keep CPI inflation at around 3% for more than a year.”
Governing Council was also direct about the limits of its tools.
“Members agreed that while monetary policy cannot lower global energy prices, it can prevent them from leading to generalized inflation,” the minutes stated.
The Bank’s revised projections now see headline CPI inflation reaching 3.5% by year-end 2026 and remaining above 3% through most of 2027, before returning to the 2% target by mid-2028.
Brokers push back on the bank’s reasoning
Joel Fox, chief operating officer of Ownright, a Toronto-based digital real estate law platform, said the decision extends an already prolonged housing correction.
“A rate hike likely locks us into year-over-year declines in housing activity for the rest of this year and into next, and I don’t see things turning until there’s a rate drop,” Fox previously said.
Jessica Rickerby, president of the Canadian Mortgage Brokers Association of Ontario (CMBA Ontario) in Toronto, challenged the bank’s underlying logic.
“While inflation is a key concern of Ontarians, so is housing affordability. The difference is that affordability is a pressing issue right now, whereas inflation is — at present — a hypothetical,” Rickerby said.
Dr. Sherry Cooper, chief economist at Dominion Lending Centres in Vancouver, said the Bank was drawing an explicit parallel to its pandemic-era policy missteps.
“The communications make it clear that the central bank wants to stay ahead of the curve and ‘avoid the debacle’ of 2022-23, when it was too late to raise the policy rate,” she wrote.
The Bank of Canada’s next rate decision is scheduled for December 9.
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
