Bank of Canada Rate Hike Expectations Rise Ahead of Decision

Expectations that the Bank of Canada will raise its benchmark interest rate have increased ahead of its October 28 decision, as policymakers weigh energy-driven inflation against a weakening labour market. The decision remains pending, and economists say a rate increase is not certain. Financial markets put the chance of a hike at about 78% to 80% in estimates reported for Friday afternoon and October 26. The Bank has held its policy rate at 2.25% for seven consecutive meetings. RBC economists now expect a quarter-point increase, which would bring the rate to 2.5%, but said their conviction is low and that the Bank could instead hold and signal a move later. Statistics Canada reported annual inflation of 3.1% in September, with gasoline prices contributing to the increase. The same month, the economy lost 68,000 jobs, following a second consecutive month of labour-market stalling. Those figures frame the central bank’s choice: address the risk that higher energy costs feed into broader inflation, or avoid tightening while employment and growth are under pressure. Bank of Canada Governor Tiff Macklem has warned that persistently high global energy prices could lift the domestic...