The Bank of Canada raised its policy rate to 2.5% on 28 October 2026: an interest-rate lesson for the Grade 10 financial literacy test
A quarter-point move by the Bank of Canada is a ready-made class example for “interest rates”, one of the seven topics on Ontario’s Grade 10 financial literacy test.
On 28 October 2026 the Bank of Canada raised its target for the overnight rate by 25 basis points to 2.5%, with the Bank Rate at 2.75% and the deposit rate at 2.45% (Bank of Canada press release). It is the first change since 29 October 2025, when the rate was cut to 2.25% (Bank of Canada, policy interest rate). The Bank gave inflation as the reason: CPI inflation has been around 3% since April and is expected to rise to about 3.5% by the end of the year, driven by persistently high oil prices. The next decision is due on 9 December 2026.
TVO financial literacy grade 10: the test guide →Practice questions →
The decision in numbers
The Bank sets the policy rate on eight fixed dates a year, and a change takes effect the day after the announcement. The Bank Rate and the deposit rate frame an operating band around the target: the deposit rate sits 5 basis points below it (Bank of Canada explainer).
| Indicator | Before 28 October | After 28 October |
|---|---|---|
| Target for the overnight rate (policy rate) | 2.25% | 2.50% |
| Bank Rate (top of the operating band) | 2.50% | 2.75% |
| Deposit rate (5 basis points below the target) | 2.20% | 2.45% |
| CPI inflation | Around 3% since April | About 3.5% expected by the end of 2026 |
| Next rate announcement | — | 9 December 2026 |
The Governing Council said it raised the rate “to reduce the risk that continuing high energy prices spread broadly to the prices of other goods and services”. It added that there could be a need to increase the rate further and that it would proceed carefully. The Bank projects growth of 1% in 2026 and 2% in 2027.
What a policy-rate change reaches in a household budget
The policy rate is the rate financial institutions charge each other for overnight loans, and households meet it indirectly. The Bank describes it as the starting point for many rates that matter to Canadians: the prime rate of commercial banks, used for loans such as mortgages and lines of credit, and the rates paid on deposits, GICs and other savings. When the policy rate rises, people and businesses pay more interest on loans, borrow less and tend to save more.
Turning the decision into the Grade 10 “interest rates” topic
TVO lists interest rates, credit and debt, and earning and saving among the concepts the requirement evaluates (TVO Learn). A real announcement makes those topics concrete. Five questions work for a class discussion or a kitchen table:
- What is a basis point? One hundredth of 1%. A rise of 25 basis points is a rise of 0.25 percentage point.
- Percentage point or percent? From 2.25% to 2.5% is 0.25 percentage point, and about 11% more than the old rate (0.25 / 2.25). Keep the two apart in every answer.
- Who pays the policy rate? Financial institutions, for one-night loans to each other. Households meet it later, through the prime rate and savings rates.
- What does a quarter point cost? As an example, on a $5,000 balance a rate 0.25 point higher adds $12.50 of interest over a year; on $1,000 of savings it adds $2.50. Simple interest, one year, rounded.
- Why raise the rate at all? Higher rates make borrowing cost more, so people borrow and spend less, which slows inflation (Bank of Canada explainer). On 28 October the Bank said it acted to reduce the risk that high energy prices spread to other prices.
Students can then check themselves with the grade 10 financial literacy test Ontario practice test: 14 questions, two for each topic, with worked answers. The full rules of the test (70% to pass, up to 2 attempts, 5% of the Career Studies mark) are in our guide to the TVO financial literacy grade 10 test, taken from ontario.ca.
Practising borrowing and saving decisions at a table
Life Capital is a facilitated board simulation: 5–8 players, a Trainer and a Banker, and about forty years of a simulated life in one sitting. Players take loans, save and invest, write every decision in a paper ledger, and see in the debrief what each rate and each loan cost them over the years.
Families book a 5-hour open session for teens from 14: CAD 200 a seat, CAD 150 each for a pair (from 1 November 2026). Schools run a club across the school year with shorter theory meetings and full 5-hour simulations. See the workshop in Ottawa and the school program.
Ask for an open-session date →Ask about a school club →
Sources
- Bank of Canada: Bank of Canada raises the policy rate by 25 basis points to 2.5% (press release, 28 October 2026)
- Bank of Canada: Policy interest rate, recent decisions and 2026–2027 schedule
- Bank of Canada: Understanding our policy interest rate (explainer)
- Ontario: Financial literacy education in schools (updated 14 October 2026)
- TVO Learn: Financial Literacy Graduation Requirement
Rates and loans, practised at a table
Each player borrows, saves and invests through about forty years of a simulated life, keeps every entry in a paper ledger, and explains each decision in the debrief.
Questions people search for
What is the Bank of Canada interest rate now?
The target for the overnight rate is 2.5%, after a 25 basis point increase announced on 28 October 2026. The Bank Rate is 2.75% and the deposit rate 2.45%. A change takes effect the day after the announcement.
When is the next Bank of Canada rate announcement?
9 December 2026. The next Monetary Policy Report comes out on 27 January 2027.
Why did the Bank of Canada raise rates in October 2026?
CPI inflation has been around 3% since April and is expected to reach about 3.5% by the end of the year, with oil prices persistently high. The Bank raised the rate to reduce the risk that high energy prices spread to the prices of other goods and services.
Are interest rates on the Grade 10 financial literacy test?
Yes. TVO lists interest rates among the seven concepts the requirement evaluates, together with budgeting, earning and saving, taxes, credit and debt, consumer awareness and financial fraud.