Bank of Canada Raises Interest Rate by 25 Basis Points to 2.50%, Further Increases Possible

On October 28, the Bank of Canada raised its benchmark interest rate by 25 basis points to 2.50%. The central bank expects inflation to remain above the target level of 2% until 2028. Bank Governor Tiff Macklem stated that further increases in the policy rate may be necessary to curb inflation, and the bank will proceed cautiously with policy adjustments. Macklem pointed out that raising the policy rate is essential to mitigate the inflation risks posed by high energy prices. He also mentioned that current uncertainties remain high due to trade disputes between the U.S. and Canada and conflicts in the Middle East, and the bank is vigilant about this. Additionally, the Bank of Canada has raised its economic growth forecast, primarily due to strong consumer spending and export performance, as well as an expected rebound in business investment. Business investment is anticipated to increase further, benefiting from the adoption of artificial intelligence and new tax deduction policies.