Bank of Canada Expected to Raise Interest Rates
The Bank of Canada is expected to raise interest rates by 25 basis points in October to combat rising inflation risks.
Market expectations have shifted toward a 25 basis point interest rate hike by the Bank of Canada at its October meeting, which would end a streak of seven consecutive holds at 2.25%. Goldman Sachs forecasts two hikes—one in October and another in January 2027—to move rates into the neutral range. Economists at the Royal Bank of Canada also expect a quarter-point increase, though they maintain low conviction and suggest the bank may instead signal a future move in December or January.
The shift follows warnings from Governor Tiff Macklem during International Monetary Fund meetings in Bangkok. Macklem noted that the war in the Middle East and persistent global energy prices have increased the risk of broader inflation. This comes as September inflation rose to 3.1%, despite a stalling labor market that lost 68,000 positions in the same month.
Goldman Sachs indicates that while business indicators remain robust, GDP growth could fall below potential in late 2026 and early 2027. This potential slowdown is attributed to trade uncertainty and proposed tariffs on furniture and cars.
