The Bank of Canada’s October 28, 2026 Rate Decision: What a Small Business Owner-Manager Should Actually Do About It

For a small business owner, the Bank of Canada October 2026 rate decision is worth less for the number it produces than for when it lands. The announcement comes on October 28, 2026 at 09:45 ET, and it is paired with a Monetary Policy Report. It also arrives about nine weeks before a December 31 corporate year-end — which is the real reason it belongs on an owner-manager’s calendar and not only on a mortgage broker’s.

This article does not forecast the decision and it is not investment advice. It sets out what the Bank is actually deciding, what the decision does and does not change in a corporation’s numbers, and which of those things can still be acted on before a year-end closes. For the underlying explanation of what the overnight rate is and how it reaches a business, Insight Accounting CPA covers that separately in our explainer on the 2.25% policy rate, and the previous instalment in this series covered the July 15, 2026 decision.

What is the Bank of Canada actually deciding on October 28, 2026?

It is a scheduled interest-rate announcement paired with a Monetary Policy Report, at 09:45 ET. The MPR pairing matters more than the rate itself for a business owner: it publishes the Bank’s own base-case projection for inflation and growth, which is the closest thing available to a published view of where borrowing costs go next. The policy rate going in is 2.25%.

The Bank of Canada announces the setting for its target for the overnight rate on eight scheduled dates each year, and four of those announcements are accompanied by the Monetary Policy Report. October 28 is one of the four. The practical difference is that on an MPR date the Bank publishes its projection and its assessment of risks, not merely a decision and a short explanation.

Two dates are worth writing down. The policy rate going into October 28 is 2.25%, a level set by the decision of October 29, 2025 and unchanged through every business day of 2026 to date. And the next scheduled announcement after October 28 is December 9, 2026 — which, for anyone with a December 31 year-end, falls close enough to the line that it is not a planning date. Decisions you intend to make for this fiscal year should not be waiting on it.

Does the policy rate change what I pay on my operating line?

Only indirectly, and not automatically. A variable-rate commercial facility is almost always priced off the lender’s prime rate plus a spread, and prime moves with the policy rate but is set by each lender. A fixed-rate term loan does not move at all until it renews. Check your own agreement before assuming anything repriced.

Three distinctions do most of the work here:

• Prime is the lender’s rate, not the Bank’s. Canadian lenders have historically moved prime in step with the policy rate, but they are not obliged to, and they do not all move on the same day. Your facility reprices when your lender reprices.
• Your spread is yours. A facility at “prime plus 1.5” moves with prime, but the 1.5 was set by your credit quality, your covenants and your negotiation, and a policy decision does not touch it. A deteriorating covenant position can cost you more than a rate move gives back.
• Fixed means fixed. A fixed-rate term loan or equipment lease is unaffected until maturity. The date that matters for that debt is your renewal date, not October 28.

Does a Bank of Canada decision change the CRA’s prescribed rate?

No — not directly, and not on the same timetable. This is the single most common confusion in this subject area, and it is worth being blunt about: the Bank of Canada does not set the Canada Revenue Agency’s prescribed interest rates.

CRA’s prescribed rates are set quarterly by regulation, calculated off the average yield on Government of Canada three-month Treasury bills in the first month of the preceding quarter. A policy-rate change therefore reaches the prescribed rate only at second hand, through Treasury bill yields, and only with a lag of a quarter or more. A decision announced on October 28 cannot change the rate that applies to the quarter it is announced in.

For the quarter running October 1 to December 31, 2026, the rates CRA has published are:

Q4 2026 prescribed rate	Rate	Where it bites
Overdue taxes, CPP contributions, EI premiums	7%	Compounded daily on balances owing, and not deductible.
Overpayments — corporate taxpayers	3%	What CRA pays a corporation on an overpayment.
Overpayments — non-corporate taxpayers	5%	What CRA pays an individual on an overpayment.
Employee and shareholder loan benefit	3%	The subsection 80.4(2) benefit rate, and the prescribed-rate-loan rate.
Pertinent loan or indebtedness	6.29%	The elective rate on certain loans involving foreign affiliates.

Note the spread between the 7% CRA charges on arrears and the 3% it pays a corporation on an overpayment. The planning implication is mundane and reliable: paying an instalment late is expensive in a way no rate decision mitigates, and deliberately overpaying to “earn” 3% from CRA is a poor use of corporate cash.

What can I still act on before my year-end closes?

Four decisions, each with its own timing test. None of them turns on what the Bank does on October 28 — which is rather the point.

1. Refinancing or re-fixing

Frame this as a question about your renewal date, not the headline rate. If a facility matures in the next few months you have a real decision and the MPR projection is genuinely useful input. If it matures in 2029 you do not have a decision, and breaking a fixed facility to chase a quarter-point generally costs more in prepayment charges than it recovers.

2. Interest deductibility

Interest is deductible under paragraph 20(1)(c) of the Income Tax Act where the borrowed money is used for the purpose of earning income from a business or property. What matters is tracing — what the money was actually used for — not what rate you paid on it. Borrowing at a lower rate does not make non-deductible interest deductible, and a clean paper trail from draw to business use is worth more than any rate move.

3. A prescribed-rate loan for family income splitting

The rate for Q4 2026 is 3%. Two qualifications decide whether this technique is worth anything, and most summaries omit the second:

• The rate is locked for the life of the loan at the rate in effect when the loan is made. A loan properly documented this quarter carries 3% for as long as it remains outstanding, whatever later quarters bring. That is the whole appeal, and it is why the quarter you execute in matters.
• The tax on split income (TOSI) rules govern whether the split income is actually taxed in the recipient’s hands at the recipient’s rate. Where TOSI applies, the income is taxed at the top marginal rate and the structure achieves nothing. Whether it applies turns on the recipient’s age, their involvement in the business and the nature of the underlying income — not on the prescribed rate.

4. Shareholder loan balances

If you have drawn funds from your corporation, subsection 15(2) can include the balance in your income, subject to the repayment relief in subsection 15(2.6), with a deemed interest benefit under subsection 80.4(2) at the 3% Q4 rate on what remains outstanding. The repayment window runs from the corporation’s year-end, which makes this a year-end item rather than an April item. Insight Accounting CPA sets out the mechanics in our guide to shareholder loans and the CRA rules for 2026.

Does any of this change my corporate tax instalments?

Not through the policy rate — but the 7% arrears rate makes instalments worth a look before year-end. Corporate instalments are based on estimated tax for the current year or actual tax for prior years, and interest on a deficient instalment is charged at the overdue rate, compounded daily and not deductible.

Two practical consequences. If your 2026 profit is running well ahead of the base year your instalments were calculated on, you are accruing instalment interest you may not have noticed, and topping up before year-end limits the damage. If profit is running well behind, you may be over-installing and effectively lending the corporation’s cash to CRA at the 3% corporate overpayment rate — which, against an operating line priced off prime, is usually the wrong side of the trade. Either way the input is your actual year-to-date position, which is a bookkeeping question before it is a tax question.

What changed in Ontario this year that actually affects the arithmetic?

More than the policy rate did. Ontario’s small-business corporate income tax rate fell from 3.2% to 2.2%, and this is in force — not proposed. The change came through Bill 97, the Plan to Protect Ontario Act (Budget Measures), 2026, which received Royal Assent and is now Statutes of Ontario 2026, chapter 2.

The mechanism is worth knowing, because it explains the proration trap. Schedule 15 of Bill 97 amends subsection 31(4) of the Taxation Act, 2007 so that the Ontario small business deduction rate is 9.3 per cent for days in a taxation year after June 30, 2026. Against Ontario’s 11.5% general corporate rate, a 9.3-point deduction produces the 2.2% small-business rate. Combined with the 9% federal small-business rate, the figure to use is 11.2%.

Two cautions follow directly from the way that provision is drafted:

• A taxation year straddling July 1, 2026 prorates by days between the old and new rates, because the statute operates on “days in a taxation year after June 30, 2026”. A corporation with a September 30 or December 31 year-end does not simply get 2.2% for the whole year, and a blind find-and-replace of the old combined 12.2% figure is wrong.
• The Ontario business limit is $500,000. Ontario Bill 12, the Cutting Taxes on Small Businesses Act, 2025, proposed raising it to $600,000 — but it is a private member’s bill that received First Reading on May 6, 2025, was ordered for Second Reading, and has not advanced since. It is not law. Any plan built on a $600,000 limit is built on a bill.

For more on the rate change and the straddle-year arithmetic, see our note on Ontario’s 2.2% small business tax rate for 2026.

What should I not read into this decision?

A single decision is not a trend. The Monetary Policy Report publishes a projection, and a projection is a conditional statement about an uncertain future, not a schedule. No financing decision for a small business should turn on a 25-basis-point move alone, and this article does not predict what the Bank will do.

Two specific errors are worth naming. The first is treating a lower policy rate as a reason to borrow in order to invest; whether that is sensible depends on your tracing under paragraph 20(1)(c), your risk tolerance and your actual position, and it is a question for a conversation with your CPA rather than for an article. The second is deferring a year-end decision until after the announcement. Almost none of the items above become clearer on October 29, and several — the prescribed-rate loan in particular — are worth less the longer they wait.

If your books are not in a state where you could run these numbers, that is the first job rather than the last. Our year-end bookkeeping cleanup checklist is the shortest route to a file you can actually plan from.

Frequently asked questions

When is the Bank of Canada’s next decision after October 28, 2026?

December 9, 2026, at 09:45 ET, according to the Bank’s published schedule of upcoming events. That announcement is a rate decision only — it is not accompanied by a Monetary Policy Report.

Will my mortgage or operating line change the same day?

Not automatically. Variable-rate facilities are priced off your lender’s prime rate plus a spread, and each lender decides when and whether to move prime. Fixed-rate borrowing does not change until it renews.

Is the CRA prescribed rate the same as the Bank of Canada rate?

No. CRA’s prescribed rates are set quarterly by regulation off average Government of Canada three-month Treasury bill yields in the first month of the preceding quarter. For Q4 2026 the overdue-tax rate is 7% and the shareholder-and-employee loan benefit rate is 3%, while the Bank’s policy rate is 2.25%. They are different numbers produced by different mechanisms on different timetables.

What prescribed rate applies to a family loan I make this quarter?

3% for a loan made in the quarter running October 1 to December 31, 2026, and that rate is locked for the life of the loan at the rate in effect when the loan is made. Whether the arrangement achieves anything depends on whether the TOSI rules apply to the recipient.

Does a lower rate mean I should borrow to invest?

That is not a question this article can answer, and Insight Accounting CPA does not provide investment advice. The tax side turns on whether the borrowed money is traceably used to earn income from a business or property under paragraph 20(1)(c). The investment side is a matter for you and a licensed advisor. Speak to a CPA before restructuring borrowing for a tax reason.

Reviewed by Bader A. Chowdry, CPA, CA, LPA on October 6, 2026. All figures in this article were verified against the primary source cited beside them on that date. Rates and legislative status change — confirm current figures before acting.