BoC October Rate Hike Odds Flip to Coin Flip — SkimNews
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- Bank of Canada has held its policy rate at 2.25% for nearly a year through six decisions in 2026, with the latest hold on Sept. 2 coming amid new U.S. tariffs and the Iran war.
- Market odds for the BoC's Oct. 28 meeting flipped to roughly a coin flip, up from a 94% hold probability before the Sept. 2 decision, according to LSEG Data & Analytics.
- RBC senior economist Claire Fan attributes the shift largely to persistently high global energy prices tied to the Iran war, calling oil prices the single biggest factor in October pricing.
- BoC's governing council worried in its Sept. 2 deliberations that oil prices were staying "higher for longer," increasing the risk to inflation, per the summary of deliberations released Wednesday.
- The U.S. Federal Reserve broke its own stand-pat stance this week with its first rate hike in over three years, partly driving the parallel shift in BoC hike expectations.
- Desjardins deputy chief economist Randall Bartlett says rising bond yields — partly from U.S. sovereign debt concerns spilling into Government of Canada bonds — give the BoC "wiggle room" because financial conditions are already tightening without a rate move.
- Capital Economics' Stephen Brown said the BoC will "inevitably upgrade its inflation forecasts" at its quarterly outlook next month to reflect elevated oil prices, though he expects October's call to be "a close call" — likely a hold.
Why it matters: Canadian borrowers face a potential turning point after nearly a year of rate stability: a BoC hike would directly raise mortgage and loan costs, but economists at RBC, Desjardins, and Capital Economics still expect the bank to hold through year-end and deliver its next hike in Q1 2027, as rising bond yields are already tightening financial conditions on their own.
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