The Bank of Canada’s next rate announcement is just over three weeks away, on Oct. 28, and speculation about what the bank will do is ramping up, with mixed predictions from economists. A majority, 68%, including TD Economics and Capital Economics, are expecting the bank will hold its rate at 2.25%, based on a soft domestic economy and trade uncertainties that argue against tightening too fast. The balance, 32%, including UBS, Manulife, and Oxford Economics, say the bank will hike its rate by .25%, based on headline inflation (which hit 3% in August) and rising energy/oil pressures. The next inflation announcement, which will play a role in the bank’s decision is Oct. 19, but other factors will likely play larger roles, including the effects of tariffs on the economy, bond yields and especially, energy prices, which were noted by bank Governor Tiff Maclem last week at a symposium in Halifax. A hike would result in an increase in fixed mortgage rates and if it doesn’t happen on Oct. 28, it likely will on Dec. 9, 2026, or Jan. 27, 2027, says Dr. Sherry Cooper, chief economist at Dominion Lending Centres, who sees higher borrowing costs over the next six to 12 months. .Speaking at the Women in Mortgage Summit Canada, Cooper pointed to a global selloff in US Treasuries, stubborn US inflation and Canada's tariff-driven price pressures as not giving the bank much room to ease. "So we'll be forced into raising interest rates,” said Cooper. “Not necessarily in October, but I think unfortunately probably by later this year or early the first half of next year. It's a reversal from Cooper’s earlier predictions this year that the bank would hold its rate through the course of 2026. Her change of mind includes concerns about the US government’s $40-trillion debt as well as instability brought on by the Middle East war and the Canada/US trade war, which have driven the escalation of US treasuries, pushing long-term yields higher and feeding into Canadian fixed mortgage rates as the trade war heats up. “Canada's five-year bond yield, the benchmark for fixed-rate pricing, jumped 14 basis points in a single day (the last week of September),” she said. "That's unheard of." If the bank hikes its rate, National Bank and Scotiabank economists feel it will be .25%, taking the rate to 2.50%. The bottom line is fixed mortgage rates are rising, not going down ."So it is a time when we should encourage anyone that is interested in potentially buying a home that they get pre-approved, because today's rates, even though they're a little above what they were last week and the week before, they're only going higher," Cooper said. “We have to expect higher interest rates, which also means that fixed-rate mortgages are very attractive now."
