Bank of Canada raises interest rates for the first time in three years

What the report says

The Bank of Canada has raised its benchmark interest rate for the first time in more than three years, increasing it by a quarter point to 2.5 percent. The move, reported by Al Jazeera on Oct. 28, 2026, came as officials responded to stronger inflation pressures tied mainly to rising energy prices and the risk that those costs could spread more broadly through the economy.

Governor Tiff Macklem said the central bank judged that higher rates were needed because the inflation outlook had worsened while the economy still showed resilience. He also said policymakers would act carefully, but did not rule out additional increases if needed. The bank’s updated projections put annual inflation at 3.2 percent in September, above its 1 percent to 3 percent target range, and it now expects inflation to remain elevated before easing back toward 2 percent by mid-2028.

The decision was the first rate increase since July 2023. Alongside the rate move, the Bank of Canada raised its inflation forecast for 2027 and slightly improved its growth outlook for Canada over the next few years. The report said officials see the economy slowing late this year before recovering later, although trade tensions with the United States and global energy markets remain important uncertainties.

The rate hike matters because borrowing costs can affect mortgages, consumer spending and business investment, while central bank decisions also signal how policymakers view inflation risks and economic momentum.