RBC blocks AI agents, the Bank of Canada hikes to 2.5%, and a December hike is 1/3

Key facts this week

1. The Bank of Canada hikes, and says more could follow

The news: The Bank raised its rate by 0.25 points to 2.5% on Wednesday, its first hike since July 2023. Traders had it priced. (Bank of Canada; "since July 2023" per CMT)

The context: The reason is energy. The Bank sees inflation reaching about 3.5% by year-end, staying at or above 3% through much of 2027 and returning close to 2% by the middle of 2028. (Bank of Canada)

"There could be a need to raise the policy rate further, but given the uncertainties, we will proceed carefully." Governor Tiff Macklem, opening statement, Oct 28

What lenders did: The big six raised prime to 4.70% on Thursday. On a $500,000 mortgage (25-year amortization, 4.5% starting rate), our calculation is that a payment that moves with prime rises about $70 a month. Fixed payments don't change until renewal. (CMT)

Fixed rates: They follow bond yields, which barely moved. The 5-year closed at 3.58% on Thursday, against 3.56% the Friday before.

What's next: For December 9, Polymarket priced a hike at about 35% on Saturday morning and Kalshi at about 32%, with no change at about 65% and 67%. Polymarket had the hike at 44% on Friday. Broker Ron Butler was far more confident on Oct 28: "I'd say there's a strong 80 per cent chance we're going to see another 25-basis-point increase." (BNN Bloomberg) Market odds are prices, not forecasts from the Bank.

RELATED: Live Bank of Canada odds · Our Oct 28 preview

2. Housing and renewals take the hit

The news: The Bank's projections show housing making virtually no contribution to growth through 2028, Bloomberg reports. Senior Deputy Governor Carolyn Rogers: "Our outlook on housing is pretty subdued." (CMT/Bloomberg)

The numbers: Desjardins says variable-rate borrowers who didn't make extra payments or lock into a fixed rate, and renew soon, may face a payment shock of roughly 50% this fall and winter. CMHC expects Ontario arrears to keep rising through mid-2027: 0.32% in the second quarter, up from 0.21%. Private lenders are worse. In the GTA, 11.1% of mortgage investment entity balances were 90+ days past due in Q1, up from 3.0% in 2023. (CMT)

The debate: CIBC economists are "still hard pressed to find any major vulnerabilities" nationally. (CMT) CMHC deputy chief economist Aled ab Iorwerth said Canada "is not facing a broad mortgage crisis," but financial pressure is "becoming more concentrated in specific regions of the country." (CMT) Our read: Both can be true. Brokers working Ontario and private-lender files will likely see it first.

RELATED: Renewal workflow for brokers · Market data

3. RBC blocks third-party AI agents

The news: RBC said on October 28 it will "block third-party personal AI agents from direct access to authenticated RBC digital properties," including online banking. Existing agent connections "will stop working." RBC gave no start date. (RBC)

The open question: RBC's security guarantee excludes losses when clients share passwords, and RBC says agents "may store your passwords." It doesn't say whether the guarantee covers agent-related losses.

4. Growth stalls a day after the hike

The news: Statistics Canada's GDP, released Friday, showed output flat in August for a second month, and an advance estimate points to a 0.1% contraction in September. Bloomberg and Scotiabank both put third-quarter growth at about 1.3% annualized, and Scotiabank says Statistics Canada guided that expenditure-based GDP is tracking similarly. (CMT/Bloomberg, Scotiabank Economics)

The debate: Scotiabank's Derek Holt noted that markets and short-term rates barely reacted, and wrote: "I don't believe that the BoC's focus on inflation suffered a material dent with these numbers." (Scotia Flash, Oct 30) Our read: The Bank is hiking into a slowdown on purpose, so every weak data point now feeds the December debate.

More from the week

• The U.S. Fed held at 3.75% to 4%, 10-2. Two members wanted a hike. (CMT, Oct 28)
• NORTHGUARD Financial confirmed it bought Quebec lender Wiseday ahead of a 2027 national rollout. (CMT, Oct 26)
• MCAN's insured originations rose 27% and uninsured 13% year to date, but its impaired mortgage ratio rose to 2.31% from 1.69%. (MCAN release, Oct 29; MPA, Oct 30)
• A Jan 1 US tariff threat on Canada's auto sector could give the Bank of Canada a reason to hold off in December, CIBC says, and if it took effect it "might mark the end to this rate hike path." (CIBC Capital Markets, The Week Ahead, Oct 30)
• Frontenac has about $41.8 million of principal left across 22 mortgage files as of Sept 30, 18 of them in power of sale. (Frontenac release, Oct 29)
• APX Lending of Toronto plans to introduce Bitcoin-backed mortgages in Canada in the first quarter of 2027 and has opened a waitlist, but has yet to publish mortgage-specific rates or eligibility criteria. (CMT, Oct 29)

What to expect next week

Budget week. The federal government tables Budget 2026 on Thursday, November 5, and CIBC's Avery Shenfeld does not expect a big surprise on deficit totals versus the Parliamentary Budget Office estimate. He says tax reform is the item to watch. (CIBC Capital Markets, The Week Ahead, Oct 30)

Corrections will be dated here.

Tune in every Saturday at 12 pm ET for the bips EOW report. Read more in the bips guides and market data.