Based on strong economic growth indicators, the Bank of Canada raised its overnight rate by .25% on Wednesday, the first rate increase since July 2023, taking the rate to 2.5%
"Growth picked up in Canada 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, stronger than expected in the July Report," said the bank in a statement. "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."
Canada's unemployment rate has hovered around 6.5% over the last few months, said the bank, adding, “A broad set of indicators continue to point to some excess supply in the economy. 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%."
Canadian exports overall have strengthened, owing to robust US demand, higher energy production and increasing signs that businesses are adapting to the changing trade environment, despite some sectors of the economy being affected by US tariffs.
"In the United States, the economy continues to grow at a robust pace, supported by consumer spending and AI-related investment," said the bank.
On a wider stage, growth in the Euro area has been resilient and broad-based and after slowing in the second quarter, Chinese growth rebounded in the third quarter,
Going forward, the bank expects a cooling period for the balance of the year and a warming in 2027.
"Owing to new US tariffs, growth is expected to slow in the fourth quarter of 2026, before picking up again in 2027," said the bank. "This rebound is supported by business investment, exports, and fiscal measures. Consumption growth is expected to moderate and housing to remain relatively weak."
