Quick Answer
The Bank of Canada kept its policy rate at 2.25% on September 2, but Scotiabank said the possibility of rate hikes had increased.
Scotiabank continues to forecast at least 75 basis points of tightening beginning in the fourth quarter and extending into early 2027. That is Scotiabank's forecast — not a decision or promise from the Bank of Canada.
For Canadians who spent the last few years watching interest rates fall, the conversation may be starting to change.
The Bank of Canada didn't raise rates on September 2. It didn't cut them either.
It held the policy rate at 2.25%.
But Scotiabank's analysis saw something important in the Bank's message: a stronger warning about inflation.
Scotiabank described the Bank's tone as more hawkish and said the October meeting is now “live” for hike risk.
More significantly, Scotiabank continues to forecast at least 75 basis points of rate increases starting in Q4 2026 and extending into early 2027.
That would mark a shift toward tighter policy.
But there's an important distinction: this is Scotiabank's forecast. The Bank of Canada has not said it will raise rates by 75 basis points — or that it will raise rates at all.
Why Scotiabank Sees the Door Opening
One clue came directly from the Bank of Canada.
Governor Tiff Macklem said that while economic data had evolved broadly in line with the Bank's July forecast, upside risks to inflation had increased.
The Bank pointed to elevated energy prices from the continuing Middle East conflict, alongside new U.S. tariffs and Canadian counter-tariffs.
Inflation is already running above the Bank's 2% target.
Statistics Canada's latest CPI report showed consumer prices increased 3.0% year over year in July, accelerating from 2.8% in June. Gasoline and travel tours were among the contributors.
That doesn't automatically mean interest rates need to rise.
But it helps explain why inflation — rather than another rate cut — is suddenly getting more attention.
October Could Be the Big Test
The next major clue arrives before the Bank's October 28 decision.
The Bank will have a fresh economic forecast, along with more inflation, employment and GDP data.
Macklem said the inflation outlook and risks surrounding it will guide future decisions.
That leaves Canadians in an unusual position.
Scotiabank sees a credible path back toward higher rates. The Bank of Canada is keeping its options open.
Neither means a rate hike is guaranteed.
For mortgage borrowers, homeowners approaching renewal and businesses carrying debt, however, the possibility itself matters. After a long period in which the debate focused heavily on when rates might fall, Canadians may now need to watch the other direction too.
TwikUp Insight
The biggest story isn't that a rate hike is definitely coming. It isn't.
The bigger change is that the debate has shifted enough for one major Canadian bank's economics team to argue that hikes could begin as early as the fourth quarter of 2026.
Four things matter most from here: August CPI, upcoming employment data, GDP growth and the Bank of Canada's October forecast.
If inflation remains stubborn while economic growth holds up, Scotiabank's argument could gain support. If inflation cools or the economy weakens significantly, the picture could change quickly.
Economic forecasts are moving targets — and October could look very different from September.