Bank of Canada interest rate hike odds increase

Traders are increasingly betting that the Bank of Canada may end its period of interest rate holds with a potential hike as early as October. While many economists believe the central bank will not raise borrowing costs this year, some anticipate a tightening cycle beginning in early 2027 due to concerns over persistent inflation.

This shift in market expectations follows a decision by the U.S. Federal Reserve to implement its first rate hike in over three years to combat inflationary pressures. The Bank of Canada has maintained its policy rate at 2.25 per cent for nearly a year. Financial market odds for a rate hold, which stood at 94 per cent prior to the September 2 meeting, have shifted significantly, with the upcoming October 28 decision now viewed by markets as a toss-up.