At 10:32 a.m. ET (15:32 GMT), the Toronto Stock Exchange's S&P/TSX composite index was up 102.39 points, or 0.51%, at 20,092.56.
The Bank of Canada hiked its benchmark overnight interest rate by 50 basis points to 4.25%, the highest level in almost 15 years, and signaled the tightening campaign was near an end.
The central bank, which has raised rates at a record pace of 400 basis points in nine months, cited still-strong growth and tight labor markets as the reason for the latest hike.
The benchmark index hit a session low immediately after the central bank's decision before recouping losses.
"Above and beyond the rate hike itself, the bank also indicated that they're going to consider whether future rate hikes are needed," said Douglas Porter, chief economist, BMO Capital Markets.
"That's seen as a signal that this might be the last rate hike."
The materials sector, which includes precious and base metal miners, led gains in the index with a climb of 1%.
Energy stocks advanced 1% as oil prices rebounded.
Rate-sensitive technology stocks lost steam, dropping 0.3%.
The TSX has recovered sharply from its October closing low on hopes that the U.S. Federal Reserve and other major central banks would temper their aggressive rate-hike stance.
(Reporting by Shashwat Chauhan in Bengaluru; Editing by Sherry Jacob-Phillips)
By Shashwat Chauhan
