Bank of Canada Forecasters Are Split Ahead of October

Two large banks, two different reads

For most of 2026, the working assumption on Bay Street was that the Bank of Canada was done moving for the year. That assumption broke apart this month.

Manulife had spent months forecasting the Bank of Canada would hold its benchmark steady through year-end, with its first move not expected until mid-2027. It abandoned that view in a September report to investors. "Inflation dynamics are changing," Manulife strategist Dominique Lapointe wrote, according to Canadian Mortgage Trends. Core measures of inflation have run close to 3% on a month-over-month annualized basis for two consecutive months, and Lapointe now expects the Bank of Canada to act at its next two scheduled announcements.

TD sees it differently. “Our view is that the case for hiking is not that compelling,” TD deputy chief economist Derek Burleton told brokers at a Toronto industry conference this month, according to Canadian Mortgage Trends' coverage of his keynote. Burleton put TD's own odds of a hold at roughly 50%, with a single move — not several — the more likely alternative if the Bank does act.

Why the same numbers point two ways

Both banks are looking at overlapping evidence: inflation stuck near 3%, a Bloomberg survey of economists that has pushed back its forecast for a return to the Bank's 2% target to the third quarter of next year, and bond yields that have already climbed. Where they part ways is on how much of that pressure is temporary.

Manulife's Lapointe points to the risk that price pressure tied to the conflict in the Middle East spreads into core goods prices through what he calls “second-round effects” — a shock that starts in one sector and works its way into everything else. TD's Burleton reads the same conflict differently, arguing markets may be over-assuming Canada will simply follow the U.S. Federal Reserve's own moves. He told brokers Bank of Canada Governor Tiff Macklem has already signalled the Bank will do what's right for the Canadian economy, not mirror Washington.

Fixed mortgage costs already moved — whichever way the Bank leans

Here's the part both forecasts agree on, and the part that matters most if you're shopping for a mortgage right now: fixed mortgage pricing tracks government bond yields, not the Bank of Canada's own benchmark directly. Burleton told brokers the two-year Government of Canada bond yield has climbed more than 30 basis points this month alone, closing near 3.426% — its highest level since July 2024. That move has already been passing through to what lenders are quoting on new fixed terms.

That's why a household waiting for a Bank of Canada announcement to know what a fixed mortgage will cost is watching the wrong number. Bond markets price in expectations well ahead of an actual announcement, so by the time October 28 arrives, whatever the Bank does may already be reflected in the offers on the table.

The arithmetic behind that, illustrative only: Canadian fixed mortgages compound semi-annually, not monthly, so the true monthly factor is (1 + annual ÷ 2) to the power of one-sixth, minus one. On a $450,000 mortgage over a 25-year amortization, a fixed contract cost of 4.29% produces a payment of $2,438.36. Move that same contract cost up half a percentage point, to 4.79%, and the payment rises to $2,563.69 — about $125 more every month, before a single Bank of Canada announcement has been made.

What this means if you're renewing or buying soon

If you're comparing a fixed mortgage against a variable one right now, the disagreement between Manulife and TD is itself useful information: even two large institutions with dedicated economics teams aren't confident about the next few months. That argues for basing a decision on your own tolerance for payment movement and your own timeline, rather than on a bet about which forecast turns out right.

• If you're renewing in the next few months, ask about holding today's fixed pricing before an announcement, rather than waiting to see what happens on October 28.
• If you're weighing variable against fixed, remember a variable mortgage's payment moves with the Bank of Canada's own benchmark directly, while a fixed mortgage's cost is already set by what the bond market expects — which has moved regardless of what the Bank ultimately decides.
• If you're buying, a written pre-approval typically holds a fixed offer for a set window, which can matter if the forecasts resolve against you before closing.

What happens between now and October 28

Two things will likely move this story before the Bank's next scheduled announcement: a fresh reading on Canadian inflation, and any further movement in bond yields tied to the conflict in the Middle East or the U.S. Federal Reserve's own decisions. TD has already trimmed its own growth outlook for next year by roughly three-tenths of a percentage point, citing new U.S. tariffs affecting close to 5% of Canadian exports — a reminder that trade developments are feeding into this calculation too, alongside inflation.

Whichever forecast turns out closer to right, the practical takeaway is the same: fixed mortgage costs are being set now, on today's bond yields, not on October 28. If your term is coming up or you're actively shopping, that's the number worth tracking — and the reason to have the conversation with a broker before the announcement, not after it.