October 28, 2026
On October 28, 2026, the Bank of Canada announced a 25-basis-point increase to its target for the overnight interest rate, bringing it to 2.50%. The Bank Rate is now 2.75%, and the deposit rate is 2.45%. The decision comes as Canada's economy shows stronger-than-expected growth, while persistent energy price increases and global uncertainty continue to put pressure on inflation. With rising business costs and inflation expected to remain elevated for longer, the Bank has increased its policy rate to help keep inflation under control. For homebuyers, homeowners, and sellers, this latest announcement provides an update on Canada's economic outlook and the factors that may influence borrowing costs and real estate market conditions. Global Economic Conditions Remain Uncertain Global economic activity has remained resilient since the Bank's July Monetary Policy Report, despite higher energy prices and ongoing geopolitical tensions. In the United States, economic growth continues at a strong pace, supported by consumer spending and investment in artificial intelligence. Growth in the euro area has also remained steady, while China's economy rebounded in the third quarter, supported by strong exports and increased government spending. However, persistently high oil prices have contributed to rising inflation in many countries. Global financial conditions have also tightened, with higher government bond yields and volatility in financial markets reflecting continued uncertainty. The Bank now expects global economic growth of 3.1% in 2026 and 3.2% in both 2027 and 2028. Canada's Economy Shows Stronger Growth Canada's economy gained momentum through the middle of 2026, with gross domestic product (GDP) growing by 3.3% in the second quarter. Recent indicators suggest growth of approximately 2% in the third quarter, stronger than the Bank had anticipated in July. Consumer spending has remained solid despite slower population growth. Business investment has also rebounded, supported by activity in the oil and gas sector and increased spending on machinery and equipment. Exports have strengthened, reflecting robust US demand, higher energy production, and signs that Canadian businesses are adapting to changing trade conditions. However, sectors affected by US tariffs continue to face challenges. The labour market remains relatively soft, with the unemployment rate holding around 6.5% for several months. Looking ahead, the Bank expects economic growth to slow in the fourth quarter of 2026 before picking up again in 2027. Canada's economy is projected to grow by approximately 1% in 2026 and 2% in both 2027 and 2028, although uncertainty surrounding Canada-US trade relations remains a key concern. Inflation Remains a Key Concern Inflation continues to be an important factor behind the Bank of Canada's latest interest rate decision. Consumer Price Index (CPI) inflation has remained around 3% since April, largely due to persistently high energy prices. The Bank expects inflation to rise to approximately 3.5% by the end of 2026. Excluding gasoline, inflation was 2.2% in September, while the Bank's preferred measures of core inflation remain close to its 2% target. However, higher fuel prices are increasing transportation and production costs, while imported industrial and electronics components have also become more expensive. Businesses may pass more of these costs on to consumers over the coming year. The Bank now expects inflation to average approximately 3% in 2027 before gradually returning to 2% by the middle of 2028. In response to these persistent inflationary pressures, the Bank raised its policy rate to 2.50%. It has also indicated that further increases may be possible, although future decisions will depend on economic conditions and how inflation develops. What Does This Mean for the Real Estate Market? The Bank of Canada's rate increase may influence borrowing costs and housing affordability, although the impact will vary depending on mortgage type, lender decisions, and individual circumstances. Variable-rate mortgage holders may be affected if lenders adjust their prime rates, while fixed mortgage rates are influenced more heavily by bond yields and market expectations. For prospective buyers and homeowners approaching mortgage renewal, borrowing costs remain an important consideration. Meanwhile, sellers will continue to be influenced by buyer demand, property prices, and the level of available housing inventory. In Guelph and the surrounding communities, local real estate conditions remain an important part of the picture. Interest rates are one factor among several that can influence buyer activity and the pace of the housing market. Looking Ahead: The Next Bank of Canada Rate Announcement The Bank of Canada's next scheduled interest rate announcement is December 9, 2026. The next Monetary Policy Report is scheduled for release on January 27, 2027. Until then, the Bank will continue monitoring inflation, economic growth, labour market conditions, energy prices, and developments in Canada-US trade relations. The latest announcement reflects the Bank's efforts to address persistent inflation while supporting the Canadian economy through a period of continued uncertainty. For anyone following the housing market, the upcoming months will provide more insight into how economic conditions and interest rate decisions may influence real estate activity. Have questions about how this may impact your buying or selling plans? Contact us today to discuss your next steps in today's market.
