Canada’s October rate debate centred on energy costs spreading into prices
The Bank of Canada’s November 10 meeting summary describes its October increase to 2.5% despite inflation excluding gasoline being close to target. Policymakers weighed persistent energy costs spreading into other prices against spare economic capacity. They left further increases possible while committing to assess conditions at each meeting.
Economics & Markets··Midday
October’s alternatives are disclosed
The Bank of Canada’s November 10 summary of deliberations describes the discussion behind its October 28 rate decision. Governing Council weighed leaving the rate at 2.25% against raising it to 2.5%, ultimately choosing an increase. Concern that persistent energy costs would spread into other prices supported that decision. The Canadian Press, reporting through CityNews, said the council remained cautious while acknowledging that further increases might be needed. The publication supplies the reasoning for the October move.[1], [2]
Near-target inflation supported holding rates
The case for keeping rates unchanged rested partly on gasoline-excluded consumer price inflation of 2.2% and core measures near 2%. Inflation had been concentrated in energy and services using substantial energy inputs, including air travel. Members also noted that economic slack persisted despite stronger growth and that new US tariffs would restrain activity. Against this, gasoline, diesel and heating oil prices had stayed elevated longer than expected in July. The council considered whether businesses would pass more of those costs to customers.[1]
Cost transmission will shape further decisions
Businesses had largely absorbed higher input costs, but surveys and historical experience suggested more would reach consumer prices over the following year. Members differed on the speed and scale of this transmission. Their October forecast put inflation at 3.5% at the end of 2026, above 3% through much of 2027 and back at 2% around mid-2028. They agreed to decide one meeting at a time amid uncertainty about war, trade and cost pass-through.[1]
