Monetary Policy Report—October 2026
Data available as: CSV, JSON and XML Available as: PDF Overview Inflation in Canada is projected to remain above 3% through much of 2027, materially higher than previously forecast. The Canadian…
Overview
Inflation in Canada is projected to remain above 3% through much of 2027, materially higher than previously forecast. The Canadian economy entered the second half of 2026 on firmer footing, and the outlook for economic activity has been revised up. Uncertainty remains elevated.
Current conditions
Inflation remains around 3%, pushed up by higher gasoline prices. The Canadian economy gained strength in the second quarter, but renewed trade tensions with the United States will weigh on near-term growth.
Tariff and other assumptions
Oil prices and refinery margins remain elevated and are assumed to decline gradually. Trade between Canada and the United States remains mostly tariff-free. But the breakdown in negotiations has led to new tariffs and increased uncertainty.
Outlook
Inflation remains above 3% through much of 2027. It then eases gradually because energy and import cost pressures take time to pass through. Growth is projected to strengthen to 2% in 2027 and 2028.
Global economy
Reduced oil supply from the Middle East and strains on refining capacity are pushing up inflation globally. Higher energy prices are weighing on economic activity. Global growth remains resilient, boosted by strong AI‑related investment.
Projections
The outlook for the Canadian economy has improved somewhat, reflecting data showing stronger-than-expected activity, new incentives for business investment and an upward revision to population. Inflation is revised up because of higher and more persistent energy prices as well as higher non-energy import prices.
Risks
The evolution of energy prices and Canada’s trade relationship with the United States remain the two most important risks to the outlook for inflation.
In focus
Refinery margins and the persistence of energy inflation
Elevated refinery margins have pushed up fuel prices further than the rise in crude oil prices alone would suggest, adding to cost and price pressures. Margins are expected to decline gradually.
Factors behind the rise in long-term sovereign bond yields
Yields on long-term sovereign bonds have risen sharply since the start of the year, reaching their highest levels in more than a decade across many advanced economies.
Using Prima to trace how an energy shock affects inflation
Increases in energy prices affect inflation in two stages. First, they quickly push up fuel prices, raising transportation and domestic production costs. Second, those higher costs gradually pass through to the prices of a broad range of goods and services.
The Monetary Policy Report is a product of the Governing Council of the Bank of Canada: Tiff Macklem, Carolyn Rogers, Toni Gravelle, Marc‑André Gosselin, Nicolas Vincent and Michelle Alexopoulos. Learn about Canada’s inflation-control strategy, the objective of Canada’s monetary policy and the main instruments used to implement it.Bank of Canada raises the policy rate by 25 basis points to 2½%
The Bank of Canada today increased its target for the overnight rate by 25 basis points to 2.5%, with the Bank Rate at 2.75% and the deposit rate at 2.45%. Content Type(s): Press, Press releasesMonetary Policy Report Press Conference Opening Statement
Governor Tiff Macklem discusses the Monetary Policy Report and the key issues involved in the Governing Council’s deliberations about the monetary policy decision. Content Type(s): Opening statements, Press, Speeches and appearancesPress Conference: Monetary Policy Report – October 2026
Release of the Monetary Policy Report – Press conference by Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers (10:30 (ET) approx.).
Content Type(s): Press, Speeches and appearances, WebcastsISSN 1490-1234 (Online)
Figures reflect the source report and its stated period. This article is for information and is not investment advice.
