(Kitco News) - The Bank of Canada (BoC) raised its key overnight rate to 2.50% on Wednesday, as expected, with the bank rate rising to 2.75% and the deposit rate rising to 2.45%.
The BoC said the global economic activity has remained resilient despite higher energy prices. “In the United States, the economy continues to grow at a robust pace, supported by consumer spending and AI-related investment,” they said. “Growth in the euro area has been resilient and broad-based. After slowing in the second quarter, Chinese growth rebounded in the third quarter, owing to strength in exports and a pickup in fiscal spending.”
“Given the ongoing resilience of the global economy, the Bank has revised up global GDP growth slightly to 3.1% in 2026, while growth in 2027 and 2028 remains unchanged from the July projection at 3.2%,” they added.
The Canadian dollar saw a volatile session ahead of the rate announcement, with the loonie trading as low as 1.4026 and as high as 1.4060 in the span of an hour. USD/CAD last traded at 1.4040 per U.S. dollar, down 0.03% on the session.
Gold continued to trade lower in Canadian dollar terms in the minutes after the announcement. XAU/CAD last traded at $5,684.40 per ounce for a loss of 0.36% on the daily chart. Track the live gold price in Canadian dollars — per ounce, gram and kilo, updated in real time.
The BoC said in its announcement that global financial conditions have continued to tighten since July. “Advanced economy sovereign bond yields are higher,” they noted. “Equity and credit markets have been volatile due to uncertainty about the outlook for the AI sector. The Canadian dollar had weakened somewhat on US-dollar strength but has since recovered to around 71 cents – the same as assumed in the July Report.”
They noted that Canadian economic activity picked through the middle of the year. “GDP growth was 3.3% in the second quarter, and recent indicators point to growth of about 2% in the third quarter,” the BoC said. “This is stronger than expected in the July Report. Consumer spending has been solid, even with slow population growth. Business investment rebounded, reflecting oil and gas sector activity and spending on machinery and equipment.”
“Owing to new US tariffs, growth is expected to slow in the fourth quarter of 2026, before picking up again in 2027,” they added. “This rebound is supported by business investment, exports and fiscal measures. Consumption growth is expected to moderate and housing to remain relatively weak.”
The BoC expects the Canadian economy to grow 1% in 2026, and 2% in 2027 and 2028. “This is a somewhat stronger overall growth projection than the July Report,” they noted. “This forecast is still subject to considerable uncertainty, particularly regarding Canada-US trade relations.”
Turning to inflation, the BoC noted that persistently high oil prices have kept CPI inflation near 3% since April, and they forecast a rise to 3.5% by the end of the year. “CPI inflation is expected to average 3% in 2027, a percentage point above the July projection, then come down to 2% in the middle of 2028,” they said. “The main sources of uncertainty around this forecast are developments in the Middle East and businesses’ responses to cost pressures.”
The BoC outlook sees inflation higher and more persistent than in the July Report. “Growth has picked up this year and is expected to recover further,” they wrote. “Against this backdrop, Governing Council decided to increase the policy rate to reduce the risk that continuing high energy prices spread broadly to the prices of other goods and services.”
“There could be a need to increase the policy rate further, but given uncertainties, Governing Council agreed to proceed carefully.”
Kitco tracks live market prices in Canada — precious metals, base metals and crypto in Canadian dollars.
