Swaps now price three-in-four odds of a quarter-point rise to 2.5% on Wednesday
A majority of economists now forecast a quarter-point increase to 2.5 percent, the bank’s first move in a year, according to a Reuters poll of 34 economists conducted between October 21 and 23.
Nineteen of them, or 56 percent, called the hike.
Canadian bond yields and swaps pricing have repriced sharply ahead of the Bank of Canada’s October 28 decision.
The Globe and Mail reported last week that overnight index swaps implied a 75 percent chance of a quarter-point hike, that the market was positioned for an overnight rate of 2.455 percent after the decision and 2.614 percent by December, and that the repricing weighed on Canada’s equity market while lifting the two-year yield 14 basis points in afternoon trading.
Bloomberg data put the odds at 87 percent, up from 70 percent earlier that week.
The policy rate has stood at 2.25 percent since a quarter-point cut in October 2025 and the bank has not raised rates since July 2023.
Inflation rose to 3.1 percent in September, barely overshooting the bank’s target range of 1 to 3 percent.
The bank’s latest business outlook survey showed sharply rising inflation expectations in the run-up to a breakdown in trade talks with the United States.
Quarterly inflation forecasts, due alongside the decision, are likely to be revised higher, Governor Tiff Macklem told reporters on Saturday in remarks markets interpreted as a hint a rate rise is coming.
Royce Mendes, managing director and head of macro strategy at Desjardins, told Reuters, “What changed the tone in the governor’s public comments on the weekend and what changed our view on Monday is the same source, and that is the responses from the BoC’s business outlook and consumer surveys.”
“The survey responses...suggest there are more serious inflationary pressures coming,” Mendes said.
Bloomberg reported last week Monday that the Bank of Montreal, Royal Bank of Canada and Desjardins Group flipped their calls that Monday, and that RBC’s securities unit also expected a hike.
KPMG Canada moved its forecast forward from December.
Benjamin Reitzes, Canadian rates and macro strategist at BMO, told Reuters the Bank of Canada would “rather make the mistake of hiking a little bit too early” than fall behind the curve.
Reitzes said moving early could mean less tightening overall, and that policymakers want to avoid repeating what happened in 2021 and 2022, he told the outlet.
In an October preview quoted by Mortgage Professional America Canada, Frances Donald, chief economist at RBC in Toronto, and Nathan Janzen, assistant chief economist, wrote that they hold “very low conviction on the idea of a rate hike this soon.”
Donald and Janzen said the central bank is almost equally likely to use this meeting to signal a hike in December or January, with the Canadian economy “improving, but still not strong.”
Canadian Mortgage Professional reported on October 20 that Stéfane Marion of National Bank of Canada expects the bank to refrain from hiking.
Economists forecasting no move mainly cited a weak economy and subdued inflation pressures despite soaring oil prices, which hit US$117 a barrel for the first time since May on the Friday before the poll closed, Reuters reported.
Sixteen of 29 respondents, a 55 percent majority, forecast one more rise before March 2027, after which policymakers would hold at 2.75 percent. Reuters reported that would be the shortest Bank of Canada tightening campaign in 30 years.
