Bank of Canada Watch

DECEMBER 2026 MEETING

Bank of Canada bases 25bps rate hike on ‘cost pass-through’ expectation, reveals bias for more hikes

The Bank of Canada raised its policy rate target by 25bps to 2.5% at the conclusion of its Oct 2026 meeting on Wednesday (Oct 28, 2026). 

In the post-meeting statement, the Canadian central bank based its decision to hike on the fact that its surveys “suggest cost pass-through will increase over the next year” and that “[t]he combination of higher-for-longer energy prices and increased pass-through adds to the persistence of inflation in the projection.”

The Bank also revealed its bias toward further rate hikes in the upcoming meetings, saying “[t]here could be a need to increase the policy rate further, but given uncertainties, Governing Council agreed to proceed carefully.”

→ Detailed Report and Analysis on The BoC Monetary Policy Decision ←

What is the Bank of Canada’s Inflation Target? 

The Bank of Canada has a so-called inflation-control target that aims to bring inflation to 2%, with an acceptable fluctuation range of 1% to 3%.

• The Canadian central bank also emphasizes that it’s a symmetric inflation-targeting regime—that it’s “equally concerned about inflation rising above or falling below the 2% target”—with flexibility embedded, such that the Bank has leeway to decide on “the most appropriate horizon for returning inflation to target” given the nature of the inflation shocks. 

While the inflation target is measured by the 12-month change in CPI published by Statistics Canada, BoC has also designated CPI-trim and CPI-median as its preferred measures of core/underlying inflation.

• CPI-trim excludes 20% of the weighted monthly price changes at each end of the CPI change distribution (40% in total), with the aim of cutting out “extreme” price fluctuations in a given month.
• CPI-median measures the price change of the goods or services located at the 50th percentile of the weighted distribution of month-over-month price changes in the CPI, aiming to infer the underlying inflation trend by looking at the central tendency of CPI changes in a given month. 

Bank of Canada’s Policy Rate

The Canadian central bank’s main monetary policy tool is its target for the overnight rate.

Last updated: October 28, 2026