Bank of Canada governor says rate hike to 2.5% was needed in face of

Takeaways from today’s Bank of Canada rate hike

We’re wrapping up our live coverage of the Bank of Canada’s interest rate announcement. 

Here are some of the key takeaways from today’s decision.

The central bank raised its benchmark interest rate by a quarter-point to 2.5 per cent, marking its first change after seven consecutive holds and its first increase since July 2023.

Governor Tiff Macklem said the hike was “needed to reduce the risk that elevated energy prices could spill over and become generalized inflation.”

As the war in the Middle East has kept oil prices high, the bank expects inflation to reach roughly 3.5 per cent by the end of 2026 and remain at or above three per cent for much of next year.

The bank’s outlook for economic growth has improved slightly, though, with the Canadian economy expected to grow two per cent next year. 

He also said the Canadian economy showed signs of resilience through the middle of 2026, growing 3.3 per cent in the second quarter.

Still, Macklem noted that uncertainty surrounding U.S. tariffs and the conflict in the Middle East continues to weigh on the economy.

Today’s hike also means higher borrowing costs for Canadians, including prospective homebuyers. 

Deputy governor Carolyn Rogers said the housing market is already struggling, particularly in Ontario and British Columbia, and that the rate increase will add to those pressures.

The bank hasn’t ruled out more hikes, but Macklem stressed that future decisions will be made “one meeting at a time.”

“There could be a need to increase the policy rate further, but given uncertainties, Governing Council agreed to proceed carefully,” the bank said.