Central bank gears up for a massive call with experts split on its next move
The Bank of Canada’s penultimate interest rate decision of 2026 arrives on Wednesday (October 28), and there's no consensus among experts on whether a rate hold or hike is in store.
The central bank has kept rates unchanged for nearly 12 months, with its last move in either direction arriving almost a year to the day of Wednesday’s announcement – a 25-basis-point cut on October 29, 2025.
The BoC’s benchmark rate, which strongly influences variable mortgage rates in Canada, has held steady since then as decisionmakers adopted a cautious approach during tense times marked by global economic uncertainty, a worsening trade dispute with the US, and inflation fears sparked by the US-Iran war.
Is a hike in store on Wednesday?
The Bank is at an “inflection point” as its next decision looms, according to Royal Bank of Canada (RBC) Economics, whose economists now say a quarter-point hike is the likeliest outcome from Wednesday’s meeting.
Still, that’s by no means a surefire thing. RBC’s Frances Donald (chief economist) and Nathan Janzen (assistant chief economist) see an almost equal probability that the BoC will hold steady this month but signal a rate hike on the way in December or January.
Canada Mortgage and Housing Corporation (CMHC) chief economist and senior vice president Mathieu Laberge, meanwhile, doesn’t expect a hike between now and the end of the year – but said he anticipates the BoC will begin raising interest rates at some point in 2027, potentially in the spring.
But 19 of 34 economists polled by Reuters last week see a central bank rate jump to 2.50% on Wednesday, with a majority also pencilling in a further increase before March.
The main reason for the sudden prospect of a rate hike is concern about the national inflation outlook. The consumer price index (CPI) ticked higher last month, hitting 3.1% as surging fuel prices pushed prices higher.
However, observers including National Bank of Canada (NBC) chief economist Stéfane Marion believe that increase was milder than might have been expected – strengthening the case for a further rate hold.
“Core inflation is still at 2%,” Marion said during an address at last week’s Mortgage Professionals Canada (MPC) conference in Calgary. “I don’t think that the Bank of Canada should be hiking [on October 28] and if they do hike, they can’t be too aggressive.”
What the BoC decision will mean for mortgages
If the Bank increases rates on Wednesday, variable mortgage rates would also move higher because banks typically raise their prime rate in line with BoC moves.
Much attention will focus on the language used by BoC governor Tiff Macklem in his press conference after the announcement, with financial markets keeping a close eye on whether Macklem indicates rate increases are likely in the coming months.
As for the possible impact on the housing market of Wednesday’s decision?
A rate hold probably wouldn’t move the needle for national homebuying, which has remained sluggish through 2026 because of economic uncertainty and rising rates.
It’s unclear whether a rate hike would slow the market further, although activity has remained moribund as potential buyers stay on the sidelines even with rate increases on the horizon.
“You’d expect with lots of chatter about rate increases in Canada online bubbling through communities – plus the recent significant rise in fixed-rate mortgages in the United States – that there’d be some pull-ahead in activity,” Royal LePage president and chief executive officer Phil Soper told CMP earlier this month.
“You’d see some people that were planning to get into the market in the spring of 2027, for example, jumping in now to get ahead of anticipated higher borrowing costs. Yet we’re not seeing material changes in the trajectory of transaction volumes. It’s very flat.”
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