The Bank of Canada raised its policy rate by 25 basis points to 2.50% on Oct. 28, while a pre-decision MUFG assessment had warned that markets left the Canadian dollar limited room to gain.
The Bank had left its overnight rate at 2.25% on Sept. 2; before the Oct. 28 announcement, MUFG analyst Derek Halpenny put the market-implied probability of a hike at 80%. MUFG said overnight-indexed swap markets priced 100 basis points, or 1 percentage point, of additional increases through September 2027. Halpenny questioned whether Bank of Canada Governor Tiff Macklem’s communication would match that full path.
Seasonally adjusted employment fell by 68,300, or 0.3%, in September, following a 41,700 decline in August, Statistics Canada tables show. The unemployment rate rose to 6.5% from 6.4%.
The Bank of Canada’s third-quarter Business Outlook Survey found that businesses responding after Canada-U.S. talks collapsed Aug. 21 had weaker confidence and less favorable export and investment outlooks. The survey also said tariffs and counter-tariffs added to cost and price pressures, with some firms passing higher costs on to customers. Sentiment and export expectations nevertheless remained stronger than at the 2025 peak in trade tensions.
EconoTimes previously covered Scotiabank’s USD/CAD outlook ahead of rate decisions.
Reuters reported that 19 of 34 economists it surveyed from Oct. 21-23 expected a quarter-point increase to 2.50%; the Bank announced that increase on Oct. 28. The poll measured economists’ forecasts, while MUFG’s 80% figure was its estimate of market-implied odds.
Halpenny said a Bank of Canada hike alone was unlikely to move the U.S. dollar-Canadian dollar pair much lower, and pointed to the Federal Reserve’s Oct. 28 decision as another influence. The Bank’s next scheduled rate announcement is Dec. 9.
