Bank of Canada Rate Decision: Hike to 2.50%, What Changed

FOMC Alerts · October 28, 2026

Bank of Canada rate decision: the Bank raised its policy rate 25 basis points to 2.50% at 9:45 AM ET. Depending on the source and the time stamp, markets had priced a 77% to 90% chance of a hike. The Fed follows at 2:00 PM ET. This is the reaction; the setup was in our Oct. 28 preview.

What did the Bank of Canada decide today?

The Bank of Canada raised its target for the overnight rate by 25 basis points to 2.50%, with the Bank Rate at 2.75% and the deposit rate at 2.45% (Bank of Canada). It’s the first hike since July 2023 and the first change since the cut to 2.25% in October 2025, according to Reuters.

The Bank’s reasons were inflation and growth. Its new outlook has inflation higher and more persistent than in July, with high oil prices holding CPI inflation around 3% since April, and growth picked up through the middle of the year. The hike is meant to cut the risk that high energy prices spread into the prices of other goods and services. On what comes next, the release kept the door open without committing: “There could be a need to increase the policy rate further, but given uncertainties, Governing Council agreed to proceed carefully” (Bank of Canada).

What were markets pricing before the Bank of Canada decision?

Hike pricing jumped from about 35% to most of the way there in roughly a week, after Governor Tiff Macklem said on Oct. 17 that inflation could drift toward 3% if oil stayed near US$100 a barrel (Globe and Mail). By Monday, estimates ran from 77.2% on CORRA swaps (RateProbability, 4:00 PM ET Oct. 26) to about 80% (FXStreet/XM), 85% (BofA, via eFXdata) and nearly 90% (Globe and Mail, citing Bloomberg data). In a Reuters poll taken Oct. 21–23, 19 of 34 economists expected a hike. After the decision, RateProbability’s page (showing cached data as of 9:47 AM ET) had the Dec. 9 meeting implied at 2.59%, about a 35% chance of another hike, and it had not updated by 10:00 AM ET.

Not everyone bought the pricing. “We still see the 100bps of BoC tightening priced over the next twelve months as excessive, limiting CAD upside,” Brown Brothers Harriman’s Elias Haddad wrote on Oct. 20 (FXStreet).

What does the October Monetary Policy Report say about inflation?

The new Monetary Policy Report projects CPI inflation of 2.9% in 2026, 3.1% in 2027 and 2.2% in 2028, compared with 2.5%, 2.0% and 2.1% in the July report (Bank of Canada). Real GDP growth is now projected at 1.0% in 2026 and 2.0% in 2027, up from 0.7% and 1.8% in July.

How did USD/CAD react to the Bank of Canada decision?

USD/CAD was at 1.4045 at 10:05 AM ET, compared with 1.4055 at 9:40 (Yahoo Finance quote page snapshots, delayed). Before the decision, XM’s analyst writing on FXStreet flagged 1.4000 and the 200-day average near 1.3880 below, and 1.4100 and the 18-month high near 1.4230 above. Those are her levels, not ours. Over the same window, SPX rose 2.86 points (0.04%) and the VIX rose 0.40 to 17.71. Those look like normal opening-range moves, so we don’t pin them on the Bank of Canada.

Does the Bank of Canada decision change Fed odds today?

As of quotes stamped about 9:35 to 9:46 AM ET (Yahoo, delayed), our calculation from fed funds futures using CME’s method put a Fed hike today at 4.4% and at least one hike by December at 87.9%, compared with 10% and 81% on Monday’s quotes. The December reading is up about 7 points, but those quotes sit right around the 9:45 decision, so we don’t read the change as a reaction to Canada. How the odds are built is in our fed funds futures probability guide.

What does the Bank of Canada decision mean for SPX 0DTE?

• Energy: the Bank of Canada was scheduled risk 15 minutes into the cash session. For SPX it’s a read on the global tightening mood, not a separate driver. The bigger scheduled event is still ahead at 2:00 PM ET.
• Premium: the VIX was 17.71 at 10:05 AM ET, which is Goldilocks 1. Let the VIX price the afternoon. A Canadian headline isn’t a reason to pay up.
• Structure: butterfly width follows the VIX regime: 20–30 SPX points in ZombieLand, 30–40 in Goldilocks 1, 40–50 in Goldilocks 2 and 50+ in Chaos, with the debit at 5–10% of the width. Right now that means 30–40-point flies, with the max loss known before entry.
• Plan, don’t predict: a priced hike that arrives is information, not a shock. Keep the 2:00 scenarios you wrote this morning and size for the Fed, not for Canada. Our scenario-planning guide walks through it.

What comes after the Bank of Canada decision?

Macklem and Senior Deputy Governor Carolyn Rogers held their press conference at 10:30 AM ET. In his opening statement, Macklem said Governing Council weighed two options, hold or hike. The case for holding was that the rise in inflation has been concentrated in energy, with CPI excluding gasoline still at 2.2% and core measures close to 2%. The Council hiked because it expects higher energy and input costs to pass through to other prices over the next year, and it will take future decisions one meeting at a time (Bank of Canada opening statement). Rates markets are pricing the next Bank of Canada meeting on Dec. 9 (RateProbability). Next up is the Fed at 2:00 PM ET, with Warsh at 2:30. The next FOMC meeting after that is Dec. 8–9; every date is in the FOMC meeting schedule 2026, and every update is in the FOMC Alerts hub.

Related reading: All FOMC Alerts coverage

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