Expectations are rising that the Bank of Canada will indeed raise interest rates this week as it considers the effect of higher energy prices on the economy.
Financial market odds for a rate hike stood at nearly 78 per cent as of Friday afternoon, according to LSEG Data & Analytics.
The Bank of Canada has held its policy rate at 2.25 per cent for seven consecutive meetings.
RBC economists said in a note to clients Thursday that they are now expecting a quarter-point hike as the central bank faces a “pivotal decision amid evolving economic conditions.”
Last week, Statistics Canada reported the annual inflation rate rose to 3.1 per cent in September as the war in the Middle East continued to drive up gasoline prices.
Meanwhile, jobs data from StatCan released earlier this month showed the labour market stalled for a second month in a row in September as the economy lost 68,000 positions.
However, the RBC economists said they have a “very low conviction” on a rate hike, and see a significant chance the Bank of Canada instead uses the meeting to set up a hike in December or January.
RBC assistant chief economist Nathan Janzen said in an interview that recent comments from Bank of Canada governor Tiff Macklem appeared to drive the change in expectations.
While speaking from the sidelines of the International Monetary Fund meetings in Bangkok, Macklem warned that persistently high global energy prices will drive up the inflation outlook at home.
“That essentially just emphasized that the central bank is increasingly worried about the potential impact of higher oil prices on future, broader inflation pressures, and they feel confident enough the economic backdrop is going to gradually continue to improve,” Janzen said.
This report by The Canadian Press was first published Oct. 26, 2026.