PREVIEW: BoC Rate Decision and Governor Statement due Wednesday 28th October, 2026 at 13:45GMT/09:45EDT

• Money markets price 84% odds of a 25bps hike; economists split (19 of 34).
• CPI 3.1% on gasoline acceleration, core steady at 2.0%, but jobs weakening.
• Governor Macklem sounds hawkish on inflation: harder to “look through” energy-driven inflation.

SUMMARY: The BoC is expected to hike rates by 25bps Wednesday, with money markets pricing an 84% chance of a pre-emptive hike as inflation concerns grow amid persistently higher energy prices. Economists are more divided, with only 19 of 34 surveyed in a Reuters poll expecting a hike. Labour market data has been unsupportive of a hike, with the unemployment rate ticking higher since July and a notable contraction in full-time employment weighing on payroll growth. However, with headline CPI slightly firmer in September on an acceleration in gasoline prices, the BoC's Core Measures Average at 2.0% and current rates at the low end of the neutral rate estimate range (2.25%), money markets view the central bank as having room to tighten to prevent second-round effects. Recent commentary has been viewed as supportive of this move; on October 16th, Governor Macklem said the longer the BoC goes without a hike, "the harder it is to look through increases in energy prices".

EXPECTATIONS: Money markets price an 84% chance of a 25bps hike, although economists in a Reuters survey are more divided, with 19 of 34 expecting a hike. Macquarie Group economist David Doyle agrees with the consensus, seeing 125bps of tightening by the end of 2027. Pedro Antunes, chief economist at Signal49 Research, said higher oil prices will start pushing up prices across the board, and it's that knock-on effect the Bank wants to prevent, adding that the Bank wants to talk tough to keep inflation expectations anchored.

DATA: Headline CPI ticked up to 3.1% Y/Y in September (prev. 3.0%), short of the expected 3.2%. The slight uptick was driven by gasoline prices, which accelerated to 27.8% Y/Y from 22.8% in August, while CPI ex-gasoline eased to 2.2% from 2.4%. The BoC Core Measures Average fell to 2.0% in September from 2.2%. The BoC's Q3 Business Outlook Survey showed expectations for 5yr inflation rising to 3.91% (prev. 3.39% in Q2), with firms expressing greater uncertainty about the timing of inflation's return to 2%. Labour market data has shown two consecutive declines in employment since the last meeting, weighed on by declines in both part- and full-time employment, with the unemployment rate edging higher to 6.5% from 6.4%. Lastly, the Ivey PMI fell in September after hitting 65.2 in August, a level not seen since April 2022, with the prices index accelerating, while inventories declined.

COMMENTARY: Since the September meeting, commentary from Governor Macklem has been seen as leaning towards a rate hike. In late September, Macklem said he expects inflation to drift a little higher in the coming months and posed the question: "is the current rate the right one or do they need to raise it?". In mid-October, he said the longer the BoC goes without hiking, "the harder it is to look through increases in energy prices". Even with headline CPI shy of expectations in September, Macklem's commentary has upheld the hawkish shift seen in money markets. The minutes from the September meeting revealed that the Governing Council agreed near-term inflation was likely to remain elevated, agreed to reiterate that the monetary policy stance would be guided by the BoC's inflation forecast and risks, and saw a higher risk of inflation spreading to non-energy goods and services in Canada. This meeting will not include an updated MPR.

Pre-decision set-ups of this kind, where market pricing leans materially further toward tightening than the economist survey, have historically been resolved by the bank's own forward language rather than by the poll, since survey medians update more slowly than positioning after hawkish official commentary. The contested question here is a familiar one for energy-importing economies: whether a gasoline-led headline uptick with core sitting at target warrants a pre-emptive move against second-round effects, or whether weakening labour data and falling core measures argue for patience. Central banks that have tightened into this configuration have tended to frame it as insurance on expectations rather than the start of a cycle, and the statement language on that distinction is what reprices the curve, the front end reacting to the decision itself and the belly to the signalled terminal path. The absence of an updated MPR puts more weight on the Governor's statement and press engagement as the vehicle for any forward signal. Worth noting is the established pattern that a hike delivered with soft employment data invites immediate scrutiny of the reaction function, and a hold against heavy pricing invites a two-way re-pricing in the currency and front-end rates. The tells are the treatment of energy pass-through, any reference to the neutral range, and whether the labour deterioration is acknowledged as a constraint.