Bank likely to pause before signalling policy easing

Following the downgrading of its economic outlook and dropped tightening bias, the recent economic data have been just about strong enough to allow the Bank of Canada to stand pat at next week's policy meeting. But with its export-led growth plan likely to face further delays and housing likely to re-emerge as a drag on activity, we expect that the Bank will eventually hint at some policy easing next year. Accordingly, we still think that any change in interest rates over the next 12 to 18 months is more likely to be a cut rather than an increase.