BoC raises rates as energy costs pose inflation risks

🏦 The Bank of Canada raised its policy rate by 25 basis points to 2.5%, its first hike since July 2023. The move aims to prevent high energy costs from spreading to other prices.

🛢️ The BoC expects CPI inflation to reach about 3.5% by end-2026 and remain elevated through much of 2027. Production and transport costs are key channels to watch.

📊 Core inflation remains near 2%, while economic slack persists. The decision reflects a precautionary approach, with growth still a consideration.

💱 For CAD, the impact depends on Canadian rate expectations relative to the US. One hike alone does not establish a sustained USD/CAD downtrend.

🔎 The BoC left further hikes open, taking decisions meeting by meeting. Oil prices and businesses’ ability to pass costs to consumers will shape expectations ahead of December 9.

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