BoC hikes rates by 25bps as expected to 2.5%; says there could be a need to increase the policy rate further, but given uncertainties, Governing Council agreed to proceed carefully

INFLATION In the outlook, inflation is higher and more persistent than in the July Report Near-term household and business inflation expectations have risen, while longer-term inflation expectations remain well anchored. 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. The main sources of uncertainty around this forecast are developments in the Middle East and businesses’ responses to cost pressures. TARIFFS Owing to new US tariffs, growth is expected to slow in the fourth quarter of 2026, before picking up again in 2027. ECONOMY The unemployment rate has been around 6.5% for several months. A broad set of indicators continue to point to some excess supply in the economy. The Canadian economy is expected to grow 1% in 2026, and 2% in 2027 and 2028. This is a somewhat stronger overall growth projection than the July Report. This forecast is still subject to considerable uncertainty, particularly regarding Canada-US trade relations.