A majority of economists polled by Reuters expect the Bank of Canada to raise its overnight rate to 2.50% on October 28 and hike once more by the end of March. The poll reverses the previous survey, in which most respondents forecast a hold.
The Bank of Canada will raise its overnight rate by 25 basis points to 2.50% on October 28 and follow with one more hike by the end of March, according to a majority of economists polled by Reuters. The aim is to pre-empt any further rise in inflation expectations.
Poll flips from hold to hike
Nineteen of 34 economists surveyed in the October 21-23 poll, or 56%, said the bank will lift its rate by a quarter percentage point, its first move in a year. In the previous poll, 80% of respondents forecast a hold at 2.25% until the end of 2026.
Interest rate futures have moved from a 30% chance of a rate hike in October to around a three-in-four likelihood. Many economists changed their view from a hold to a hike this week, citing remarks from BoC Governor Tiff Macklem.
Inflation survey drives the shift
Inflation rose to 3.1% in September, barely overshooting the central bank's target range of 1% to 3%. The bank's business outlook survey showed sharply rising inflation expectations before a recent breakdown in trade talks with the United States.
Royce Mendes, managing director and head of macro strategy at Desjardins, said the governor's tone and economists' views changed because of the same source. According to Reuters: "The survey responses…suggest there are more serious inflationary pressures coming."
Economists see a short tightening campaign
Sixteen of 29 respondents, a 55% majority, also forecast one more rise before March 2027, after which policymakers would hold at 2.75%. If correct, it would be the shortest BoC tightening campaign in 30 years.
Economists who forecast no move next week mainly cited a weak economy and subdued inflation pressures despite oil prices that hit $117 a barrel on Friday, the first time since May. Poll medians show inflation averaging 2.8% in 2026 and falling to 2.3% in 2027.
Source: Investing.com (Reuters)
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