Hold, hike or higher-for-longer? What to really expect from Bank of Canada interest rates on Oct. 28

On Wednesday, Oct. 28, Tiff Macklem will walk into a press conference carrying the most difficult decision of his governorship. Inflation is running at 3 per cent — the top of the Bank of Canada's target band. The economy just shed 68,300 jobs in a single month, according to Statistics Canada. Bay Street's economists are openly split. And whatever he decides, the most important rate move of the autumn has already happened without him.

Start with the facts, because the noise around this decision is extraordinary. The policy rate has sat at 2.25 per cent since last October — seven straight holds. At its September meeting, the Bank dropped the reassuring line that the rate "remains appropriate" and warned that upside risks to inflation have increased. Governor Macklem, in a Halifax speech last month, said the Bank doesn't want to be "too slow" — because if it is, it will eventually "have to raise rates very quickly." That is not the language of a central banker at peace.

The hawks have real ammunition. Headline inflation has sat at or above 3 per cent in three of the last four months. Strip out gasoline and underlying pressure is building, not easing — 2.4 per cent, up from 2.2 per cent in July, Statistics Canada reported. Gasoline itself is up 22.8 per cent on the year, and Brent crude is hovering near $105 a barrel, well above the oil-price path the Bank assumed when it forecast inflation drifting back to 2 per cent. Scotiabank — the only Big Six bank firmly calling for an October hike — has been warning about this since last November. UBS and Manulife have joined the hawkish camp in recent weeks. And the loonie, at an 18-month low near 70 cents U.S., is importing inflation with every cross-border purchase.

But the doves have the fresher data. September's jobs report was a shock: 68,300 jobs gone against expectations of a 9,200 gain, the second straight monthly decline, unemployment up to 6.5 per cent, and the participation rate at its lowest in nearly three decades outside the pandemic. Young workers lost 48,000 positions. TD's Andrew Hencic said the report would "pour some more cold water on near-term rate hike expectations." BMO's Doug Porter argues the trade war "really does darken the growth outlook" and that tariffs are what the Bank must focus on "first and foremost." Four of the six big banks — RBC, TD, BMO and CIBC — now expect the Bank to hold through year-end. Markets agree, mostly: the odds of an October hike have collapsed from a coin flip in late September to about one in four.

Here's what the debate misses: for most Canadians, the Bank's decision is already priced in — and not in their favour. While Bay Street argued about October versus December, the bond market moved. The five-year Government of Canada yield has surged from about 2.6 per cent in February to roughly 3.7 per cent. Every Big Six bank has raised fixed mortgage rates — 10 to 50 basis points since early September. The best advertised insured five-year fixed is around 4.3 per cent; bank posted specials sit above 5 per cent. With some 1.15 million mortgages renewing this year and another 940,000 next, according to CMHC figures cited in industry reporting, the tightening is happening with or without Macklem. As National Bank's Matthieu Arseneau put it, rising long-term rates are "already creating an additional headwind for the Canadian economy."

The honest answer is that nobody knows — and the next ten days will decide it. September CPI lands Monday, Oct. 19 at 8:30 a.m., alongside the Bank's own business and consumer surveys. UBS expects 3.3 per cent; anything near that revives the hawks. Oct. 28 brings not just the decision but the quarterly Monetary Policy Report, the debut of the Bank's new "Prima" forecasting model, and a Macklem press conference — plus, in a scheduling quirk, the U.S. Federal Reserve announces its own decision the same afternoon. Dec. 9 is the final call of the year, and markets have a hike there priced at nearly 90 per cent.

So what should Canadians expect? My read of the evidence: a hold on Oct. 28, with December genuinely live. The jobs data bought Macklem time, but it didn't buy him comfort — inflation at the top of the band with energy prices surging is not a backdrop for standing pat indefinitely. The Bank will want to see October's data before moving, and the new forecasting model gives it intellectual cover to wait one more meeting.

But waiting changes nothing for households. Whether the policy rate moves in October, December, or not at all, Canadians renewing mortgages are already paying for a tightening the Bank never voted for. The question isn't just what Macklem does on the 28th. It's whether anyone in Ottawa has a plan for an economy where borrowing costs rise while jobs disappear — because that combination, not the policy rate, is what will define 2027.