Why Does a Bank of Canada Rate Hike Land Differently in Every Province?

In Nova Scotia, consumer prices rose 5.6% in the year to September. In Ontario, they rose 2.5%. The two numbers come from the same Statistics Canada release, and they describe the same month, but they describe two different price experiences inside one country. On October 28, the Bank of Canada set one interest rate for both of them.

The Bank of Canada raised its target for the overnight rate by a quarter point, to 2.50%, with the Bank Rate at 2.75% and the deposit rate at 2.45%. It was the first increase since July 2023, after seven holds at 2.25%, and it put the rate back exactly where it stood before the cut of October 2025. Governor Tiff Macklem’s reason, in the Bank’s release, was the risk that high energy prices spread from fuel bills into the prices of other goods and services.

Energy prices rose 19.0% nationally in September, after 15.4% in August, and gasoline rose 27.8%, after 22.8%. Fuel oil and other fuels rose 57.8%, after 43.7%, and Statistics Canada says that increase had a greater impact in Atlantic Canada, where fuel oil is more widely used. Prince Edward Island’s prices rose 5.7% over the year, Nova Scotia’s 5.6%, New Brunswick’s 5.0% and Newfoundland and Labrador’s 4.7%, against 3.1% nationally. With energy stripped out, the Atlantic provinces still sit above the country. Nova Scotia reads 3.3%, Prince Edward Island and New Brunswick 2.6% each, Newfoundland and Labrador 2.4%, against 2.1% nationally.

Quebec lost 49,000 jobs in September, or 1.1% of its employment, after a 19,000 drop in August, and the province has lost 130,000 jobs since January, a 2.8% decline. Its unemployment rate rose 0.4 points in the month to 6.0%. The national job losses were concentrated in the public sector, which shed 70,000 positions in September, its fourth consecutive monthly decline, with education down 35,000, health care and social assistance down 23,000 and manufacturing down 13,000. Private-sector employment was little changed on the month, while self-employment fell by 23,000.

Ontario lost 20,000 jobs in September, a 0.2% decline. Its unemployment rate held at 7.0%, the highest among Canada’s four largest provinces, even though employment there remains 86,000 higher than a year earlier. Ontario Premier Doug Ford posted on X on the morning of the decision, before it was released, calling a hike “a massive mistake.” He wrote: “Higher rates won’t get oil moving through the Strait of Hormuz or lower tariffs on Canadian businesses. They will only make life more expensive for Canadian families and workers, punishing them for something they can’t control.”

Jessica Rickerby, president of the Canadian Mortgage Brokers Association of Ontario, said affordability was the pressing issue in the association’s opposition to the decision, telling Mortgage Professional America that “affordability is a pressing issue right now, whereas inflation is, at present, a hypothetical.” The association cited about 5,300 new home sales in the Greater Toronto Area in 2025, a record low and 81% below normal levels.

Alberta added 23,000 jobs in September, up 0.9%. Employment there is 76,000 higher than a year earlier, and unemployment fell 0.4 points to 6.4%. Business investment rebounded in the Bank’s account, reflecting oil and gas activity, and exports strengthened on higher energy production alongside robust demand from the United States. British Columbia lost 20,000 jobs, its first monthly decrease since March, with unemployment little changed at 6.4%, and Manitoba lost 4,400, with unemployment at 5.0%, the lowest provincial rate.

Canada lost 68,300 jobs in September. The Reuters poll had expected a 9,200 gain, and August had already taken 41,700, for about 110,000 jobs over the two months. Employment among people aged 15 to 24 fell by about 48,000 in September, and the participation rate fell to 64.8%, its lowest since December 1997 outside the pandemic years. Average hourly wages rose 2.3% from a year earlier, to $37.64, which sits 0.8 points below the 3.1% headline inflation rate and just above the 2.2% rate excluding gasoline.

The rise in inflation has so far been concentrated in energy prices and in services that rely heavily on energy inputs, such as airfares, Macklem said in his opening statement, making the case for holding. Inflation excluding gasoline is still 2.2%, and measures of core inflation remain close to 2%, while economic slack remains and new United States tariffs will weigh on growth. The argument the Council accepted was about what happens next: businesses have mostly absorbed higher input costs so far, and the Bank’s surveys suggest cost pass-through will increase over the next year, while near-term inflation expectations have risen.

Bond markets moved more than the currency after the decision. The two-year yield rose as much as 7.2 basis points to 3.441%, its highest since August 2024, and the ten-year yield rose 2.4 basis points to 3.885%, while the loonie rose 0.1% to 1.4035 per United States dollar. Swap markets put a further hike in December at 45% and had fully priced a second increase by January, according to Reuters. TD Securities strategists noted the Bank’s tendency to move consecutively after a long pause and saw a lower bar for a December hike.

Roughly half the firms in the Bank’s third-quarter Business Outlook Survey said they planned to pass on some or all of their cost increases linked to tariffs and the Middle East war. That share was higher than in the previous quarter. The Bank said those pricing plans reflected improving demand as well as firms’ desire to recover margins compressed by earlier cost increases.