Bank of Canada May Raise Interest Rates This Month Amid Inflation Risks

The Bank of Canada may raise its policy interest rate this month as inflation risks continue to grow. UBS Global Research expects the central bank to increase the rate by 0.25 percentage points at its upcoming meeting, following seven consecutive decisions to hold it at 2.25%.

UBS economist Abigail Watt expects another 0.25-point increase in January, taking the policy rate to 2.75%, which she considers the midpoint of the bank’s neutral range. Rates could then remain unchanged for an extended period.

The forecast marks a shift from earlier expectations that the Bank of Canada would leave rates unchanged throughout the year. Inflation rose to 3% in August, while UBS expects it to reach 3.3% when Statistics Canada releases September’s inflation data on October 19.