Bank of Canada hike odds: 67% for Oct 28 After 3.1% CPI

Bank of Canada hike odds jumped after Monday's inflation print. September CPI came in at 3.1%, up from 3.0% in August, and Governor Tiff Macklem had already warned over the weekend that oil near $100 could force the bank to "nudge" inflation lower with higher rates. At about 06:11 UTC on October 20, Polymarket priced a 25 bp hike on October 28 at roughly 67%, down from about 70% fifteen minutes earlier.

What actually happened

The inflation number itself was close to forecasts. A Bloomberg survey of economists cited by CBC expected about 3.18%, so 3.1% was a touch soft. The problem is the mix. Fuel is doing almost all the work, and the war in the Middle East keeps oil high: the December WTI contract slipped to about $97.70 on Monday, per CBC.

Strip gasoline out and the picture looks almost calm. Groceries rose just 1.7%, the smallest annual gain since May 2024, and shelter was up 1.8%. CIBC's chief economist told CBC that underlying inflation measures are "around two per cent." That is the case for a hold.

The case for a hike comes from Macklem himself. Speaking in Bangkok on Saturday, he said that if oil stays around $100, inflation should "gradually drift up" from about 3%, and the bank will ask whether it has to raise rates to bring it back to the 2% target. The bank's Business Outlook Survey, also published Monday, showed firms expect 3.7% inflation over the next year.

Why markets flipped

Bond traders listened to the governor more than to the core data. The Globe and Mail reported that Canada's 2-year yield jumped about 14 basis points on Monday and the TSX fell 0.7% to 35,928.63 as money markets moved toward a hike. Several big bank economists switched their calls; RBC still expects a hold for the rest of 2026.

The jobs side is weak, which is what makes this a real debate. Canada lost 68,000 jobs in September, the second straight monthly decline, and unemployment is around 6.5%. Hiking into a softening labor market to fight an energy shock is the classic central-bank headache. Oxford Economics called the decision "a very close call."

For context on how other central banks are priced this month, see our Fed October hold and ECB October odds pieces. The Bank of Canada is the one major central bank where markets now lean toward a hike instead of a hold.

What Polymarket thinks

Polymarket's "Bank of Canada Decision in October?" market resolves on the official October 28 announcement. At about 06:11 UTC on October 20, the "25 bps increase" outcome traded at 0.6745, with a bid of 0.65 and an ask of 0.699 on about $110.5K of volume. At 05:57 UTC the same outcome had been 0.702 with a much tighter 0.695/0.709 book, so the spread widened. "No Change" was at 0.3145. A 50 bp or larger hike, and any cut, each sat at 0.0005.

Total event volume was about $307.6K, with roughly $120K traded in the 24 hours to about 05:57 UTC, so this market woke up on the CPI news. The Polymarket price sits a little below the roughly 75% that the Globe and Mail said swaps were pricing on Monday. When a prediction market and the bond market agree, the signal is stronger than either alone.

What would move the price

Toward a hike: oil holding near $100, a hawkish leak, or any sign that energy costs are spreading into services and wages. Macklem has already shown his hand, and central bankers rarely talk up a hike and then skip it without new data.

Toward a hold: oil falling sharply on Middle East news, or more weak labor data before the meeting. Since core inflation is near 2%, a drop in crude would give the bank an easy reason to wait and would cut Bank of Canada hike odds fast.

What to do as a reader

If you have a variable-rate mortgage or loan in Canada, plan for the possibility of a quarter-point increase on October 28 and check how your payment would change. Fixed-rate borrowers may see lenders reprice based on bond yields, which have already moved.

If you watch prediction markets, compare the Polymarket price with swap-implied odds, not with social media takes. These odds are a probability, not a promise, and the decision lands on October 28 at the scheduled release. Nothing here is investment advice.

Sources: CBC News on September CPI, The Globe and Mail on market pricing and Polymarket market page.