[OPEN FORECAST] · PG-0012

Published October 23, 2026 · Resolution: October 28, 2026

The Bank of Canada has held its policy rate at 2.25% for almost a year. That pause may end on Wednesday.

Prediction markets are now assigning roughly an 82% probability to a 25-basis-point increase at the October 28 meeting. Inflation is back above 3%, energy prices remain elevated, and Governor Tiff Macklem has warned that price pressures could become more persistent.

There is a credible case for a hike.

But an 82% probability leaves relatively little room for the Bank to wait. And the underlying inflation data suggest that waiting is still a meaningful possibility.

Event: Bank of Canada raises its overnight-rate target by exactly 25 basis points at its October 28, 2026 policy announcement.

Current policy rate: 2.25%

Resolution date: October 28, 2026

Status: OPEN

Market reference: Polymarket, October 23, 2026. The market probability is rounded from an observed 81.4% snapshot at 06:27 UTC. Probabilities may subsequently change.

Canada's September inflation report presented a difficult headline: consumer prices rose 3.1% from a year earlier, up from 3.0% in August.

A central bank targeting 2% inflation cannot dismiss that number, particularly when high energy prices and tariffs risk feeding into other prices.

But the composition of inflation matters.

Gasoline prices were up 27.8% year over year. Excluding gasoline, Canadian inflation actually slowed from 2.4% to 2.2%.

The Bank's preferred measures of underlying inflation also remained relatively contained. CPI-median was 1.9% in September, while CPI-trim was 1.8%.

Meanwhile, Canada's labour market is losing momentum. Employment declined in September, and unemployment rose to 6.5%.

These numbers do not rule out a rate increase. They do, however, complicate the argument that the Bank must act immediately.

Our assessment is that a hike remains the most likely individual outcome, but the market is assigning it more certainty than the evidence justifies.

The distinction is important. ProbGap is not forecasting that the Bank will necessarily hold rates. We are forecasting that the probability of a hold is materially higher than market pricing implies.

The decision rests on a question that headline inflation alone cannot answer:

Are higher energy and tariff costs spreading into persistent domestic inflation, or is the Bank still confronting a supply-driven price shock alongside a weakening labour market?

There is evidence pointing in both directions.

The latest Bank of Canada business survey shows that firms remain concerned about costs and inflation, with renewed trade tensions increasing the pressure. But hiring intentions are soft, and weaker demand could make passing those costs on more difficult.

For policymakers, the challenge is not simply to react to higher prices. It is to decide whether higher interest rates are needed now to prevent those prices from becoming a persistent inflation problem.

That is where our forecast differs from the market.

The full analysis examines the inflation breakdown, the Bank's recent policy signals, the competing scenarios and what could invalidate our 65% forecast before Wednesday's decision.