The Bank of Canada raised its policy interest rate by a quarter of a percentage point on Wednesday, bringing it to 2.5 per cent, the first increase since July 2023.
The Bank cited a deteriorating inflation outlook as the primary driver of the decision. Inflation currently sits at 3.1 per cent, above the Bank’s 2 per cent target, with Governor Tiff Macklem pointing to elevated energy prices as a key concern.
“An increase in the policy rate is needed to reduce the risk that elevated energy prices could spill over,” Macklem said, adding that further increases remain possible. “There could be a need to raise the policy rate further, but given the uncertainties we will proceed carefully.”
For variable-rate mortgage holders, Wednesday’s move translates directly into higher borrowing costs. The prime rate, which lenders use to set variable mortgage rates, is expected to rise in step with the Bank’s decision.
Fixed-rate borrowers are not immediately affected, though bond yields, which drive fixed mortgage pricing, have been rising in anticipation of today’s announcement.
The Bank’s next rate decision is scheduled for December 9, 2026.
Source: BNN Bloomberg
