Bank of Canada Sees Elevated Inflation Into 2028, Housing To Remain Weak

Canada’s central bank raised its key policy rate as it tries to tame rising inflation. The Bank of Canada (BoC) hiked its overnight rate 25 basis points to 2.5% this morning, its first hike in over 3 years. In the accompanying report, the BoC warns of elevated inflation into mid-2028. Higher input and financing costs will also keep housing activity weak while boosting shelter inflation. Canadian Inflation Isn’t Expected To Return To Target Until 2028 The BoC sees elevated inflation into 2028. The latest forecast from the central bank shows CPI inflation above 3% through Q3 2027. That’s roughly a point higher than they anticipated in their July report. It isn’t expected to return to their 2% target rate until mid-2028. While elevated inflation has largely been confined to energy and related categories, the Bank expects those pressures to spread over the next year. High energy prices are spreading into production, transportation, and imports. Businesses have absorbed much of the increase so far, but expect to pass more on to consumers over the next 12 months, warns the BoC. Even after energy inflation turns negative in late 2027, earlier cost increases will continue to work their way...