The Bank of Canada raised its key interest rate to 2.5% on Wednesday, its first increase since 2023, and said more hikes may follow. Black workers meet the move from a weaker spot than most: their unemployment rate was already 11.1%, double the 5.5% for non-racialized Canadians, according to the State of Black Economics Report from Toronto Metropolitan University’s Diversity Institute.
The bank raised the rate by a quarter of a percentage point, from 2.25%, after holding it steady at seven straight decisions. Governor Tiff Macklem said energy prices, pushed up by the war in the Middle East, are the reason. “With the outlook for inflation substantially higher and the economy showing resilience, an increase in the policy rate is needed to reduce the risk that elevated energy prices could spill over and become generalized inflation,” the bank said.
Inflation was above 3% in September. The bank expects it to reach about 3.5% by the end of the year and to stay near 3% through most of next year before returning close to its 2% target by the middle of 2028. It raised its 2026 growth forecast to 1.0% from 0.7%.
Macklem did not rule out further increases. “There could be a need to increase the policy rate further, but given uncertainties, we will proceed carefully,” he said. The next decision is scheduled for Dec. 9.
Where Black workers start
A higher policy rate makes borrowing more expensive and is meant to cool demand. The bank’s decision is about prices, not about any one group of workers. But the starting line is not the same for everyone.
The Diversity Institute report found that Black unemployment rose 3.7 percentage points between 2022 and 2024, compared with 0.5 points for non-racialized Canadians. Black youth aged 15 to 24 had an unemployment rate of 20.0%, against 11.1% for non-racialized youth. Black Canadians also work at higher rates: participation was 73.8% and employment 65.6%, compared with 61.3% and 57.9% for non-racialized Canadians. Nearly one in five Black workers (19.2%) earn below the low-pay threshold.
That means a group that is working more is still more likely to be out of work, and more likely to be paid little when it is in work. Any slowdown in hiring reaches those workers with less cushion.
The bank’s own forecast sees an economy that is still growing, which is why it chose to raise rates. Whether that growth reaches Black workers, whose unemployment has climbed faster than anyone else’s, is not something the rate decision answers.
The bank meets again on Dec. 9.
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