Why a Bank of Canada hike on October 28 is less likely than Polymarket prices

A central bank whose core inflation sits inside its band has no trigger for a hike, so after a hold its usual next step is another hold. Our reference-class estimate puts the exception at about 8 hikes in 40 comparable cases, which gives an anchor of 20.7% before any argument about Canada (Fig. 1). On its own, that anchor sits 17.3 points below Polymarket’s price, nearly four-fifths of the whole gap. The five forces that follow move the number a further 4.9 points (Fig. 2).

The Bank of Canada’s own practice points the same way. It measures inflation as the 12-month change in the CPI, but in setting policy it looks through temporary swings in volatile prices and uses core measures as its operational guide (Bank of Canada, 2026d). On September 2 it warned that upside risks to inflation had increased and still left the rate where it was, saying the Governing Council is “prepared to adjust monetary policy as needed” (Bank of Canada, 2026a).

The Bank’s record over the past year is the live case of that pattern. It left its rate at 2.25% at seven straight decisions, from December 10, 2025 to September 2, 2026, after quarter-point cuts on September 17 and October 29, 2025 (Bank of Canada, 2026b). The last of those holds came with oil already rising: Brent crude, the global benchmark, went from about $90 a barrel on August 28 to about $98 on September 2 (U.S. Energy Information Administration, 2026). In the forecast the seven holds also count as a force of their own, and they lower the number by 1.1 points.

Central banks have sometimes hiked into a surge in commodity prices, and the European Central Bank did so in 2008 and again in 2011. The ECB held its main rate at 4.00% from June 2007 and raised it to 4.25% on July 3, 2008 (European Central Bank, 2026). It cited June inflation of 4.0%, which it said came largely from energy and food prices (European Central Bank, 2008a). Three months later, on October 8, 2008, it cut by half a point, in a move announced jointly with the Bank of Canada and the Federal Reserve as the financial crisis deepened (European Central Bank, 2008b). In 2011 it hiked in April and July, with inflation it tied largely to higher commodity prices, and two cuts by December took its main rate back to 1.00% (European Central Bank, 2011; European Central Bank, 2026). Both episodes were reversed within months.

To match the market’s price with the same forces, our estimate would have to be about 18 hikes in 40 cases, nearly an even split between hiking and holding. The Bank’s practice of looking through swings in energy prices argues against odds that high, and counting the historical record of such decisions is the check that would settle the size.

The core inflation the Bank of Canada uses as its guide sat at or under its 2% target in August. That is the largest single force in our forecast, and it lowers the chance of an October hike by 2.3 points. Statistics Canada’s August figures, published on September 14, put CPI-trim at 1.9% and CPI-median at 2.0% on the year, the two core measures TD Economics calls the Bank’s preferred ones (Fig. 3; Statistics Canada, 2026b; Preston, 2026). Both stood at the same levels in July, and on September 2 the Bank said that measures of core inflation “remained close to 2% in July” (Statistics Canada, 2026b; Bank of Canada, 2026a).

Headline inflation is higher, and it has run near 3% for months on the price of gasoline. All-items inflation was 3.0% in August, the same as in July (Statistics Canada, 2026a). Gasoline prices were 22.8% above a year earlier, after a 25.7% rise in July, and Statistics Canada reported that the slower rise in gasoline pulled the index down while higher prices for travel tours and rent pushed it back up (Statistics Canada, 2026a). Prices excluding gasoline rose 2.4%, up from 2.2% in July (Statistics Canada, 2026a). Excluding food and energy, prices rose 2.1% (Statistics Canada, 2026d), and the third core measure, CPI-common, ran higher at 2.6% (Statistics Canada, 2026b). The September oil spike falls after the August reference period, so it first reaches the index in the September figures due on October 19 (Statistics Canada, 2026c).

A renewed trade dispute with the United States gives the Bank a reason to wait, and in our forecast it lowers the chance of an October hike by 1.1 points. On September 2 the Bank of Canada reported new US tariffs and Canadian counter-measures after trade talks broke down (Bank of Canada, 2026a). Its September 16 summary of the Governing Council’s deliberations put the tariffs on roughly 5% of Canadian goods exports to the United States, and said the renewed uncertainty would weigh on confidence (Bank of Canada, 2026c). Members held a range of views on how far that would slow the economy, and the summary noted that, with spare capacity and a soft labour market, weaker growth could keep inflation pressures contained (Bank of Canada, 2026c).

Economists at two Canadian banks argued against a near-term hike, on different evidence, and their view lowers the number by 0.4 points, the smallest of the four forces that push it down. National Bank Financial wrote on September 2, before the August CPI, that it expected a hold until hikes in the first quarter of 2027 (Schleich and Currie, 2026). TD Economics wrote on September 14, after the August figures, that the report did not support the degree of tightening markets had begun to price, and that core inflation should stay within the Bank’s comfort zone (Preston, 2026).

The strongest case for a hike starts with the jump in oil prices in September. Brent crude rose 46% in under three weeks after August 28, to $131 a barrel on September 15, and none of that rise is in the CPI yet (U.S. Energy Information Administration, 2026). Headline inflation had already sat near the top of the Bank’s 1% to 3% band since April, on gasoline prices more than a fifth above a year earlier (Bank of Canada, 2026c; Statistics Canada, 2026a).

The Bank’s own words left the door open, and that hawkish language on energy is the one force in our forecast that raises the number, by 0.4 points. Its September 2 statement said recent data reaffirmed its view of a broadening recovery, after second-quarter GDP growth of 3.3%, and that upside risks to inflation had increased (Bank of Canada, 2026a). The Governing Council’s September 16 summary went further: members agreed that if higher energy prices spilled over into other prices, it could require a monetary policy response to stop broad-based inflation from setting in (Bank of Canada, 2026c).

Economists at both banks acknowledged the opening. TD Economics wrote on September 14 that the Bank’s core measures “started to drift a bit above 2%” in August: measured over that month alone and scaled up to a year, they ran at 2.7% (Preston, 2026). National Bank Financial wrote on September 2 that “on the surface then, the next meeting is ‘live’”, before adding that it would be “very surprised” if the Bank tightened that soon (Schleich and Currie, 2026).

Markets leaned toward a hike in the days after the summary appeared. On the day it came out, Wednesday, September 16, the Federal Reserve raised its target range, which put its upper bound at 4.00% from September 17, 1.75 points above Canada’s rate (The Canadian Press, 2026; Board of Governors of the Federal Reserve System, 2026). The Canadian Press reported on September 18 that markets saw the October decision as a coin flip, narrowly in favour of a hike (The Canadian Press, 2026). Polymarket moved further that way, and on September 24 its midpoint stood at 44.7%, 6.7 points above its September 20 level (Polymarket, 2026).

Our answer rests on what the Bank itself says drives its decisions. It looks through temporary swings in volatile prices and uses core measures as its guide to underlying inflation (Bank of Canada, 2026d). Its September 16 summary said the Governing Council had so far been looking through the initial direct impact of gasoline prices on inflation, and it tied any response to spillover into other prices (Bank of Canada, 2026c). On the measures the Bank uses as its guide, core inflation over the full year to August was at or under 2%, so TD’s 2.7% is a single month’s pace (Fig. 3; Preston, 2026).

The Bank held on September 2 with oil already climbing, and the oil market then priced the spike to fade. On September 18 Brent cost about $120 a barrel for immediate delivery, while DTN reported the contract for November delivery at about $105 that morning (U.S. Energy Information Administration, 2026; Bastati, 2026). An October hike would repeat the ECB’s hikes of 2008 and 2011, both made into a surge in commodity prices and both reversed within months (European Central Bank, 2026).

Statistics Canada publishes the September Labour Force Survey on October 9 (Statistics Canada, 2026c). A clear fall in employment would confirm the trade force and push our number lower, while a strong gain would weaken it.

September CPI follows on October 19, and it is the first release to carry the oil spike (Statistics Canada, 2026c). If CPI-trim or CPI-median rises above 2.5% on the year, energy would be reaching the core measures the Bank uses as its guide, and Polymarket’s case would gain ground. If both stay near 2%, the core force holds, whatever the headline does.

Brent stood at about $115 on September 22, 12% below its peak a week earlier (U.S. Energy Information Administration, 2026). A return above $131 before the decision would strengthen the energy force, and a slide back toward $90 would take most of it away.

Speeches by Governing Council members can shift the picture only until October 20. Under the Bank’s blackout guidelines, members stop giving speeches on the Tuesday eight days before a decision with a Monetary Policy Report (Bank of Canada, 2026e). Governor Macklem said on September 21 that the Bank had been looking through the direct impact of higher oil prices, and that it would assess whether the current rate balances the risks to its inflation outlook (Macklem, 2026). A speech before October 20 that drops the looking-through language would favour Polymarket’s side.

The Bank of Canada announces its decision, with the October Monetary Policy Report, on October 28, 2026 (Bank of Canada, 2026b). Until then the question is open, and that announcement will settle our forecast of 15.9%.