The Bank of Canada will probably err on the side of caution at its policy meeting next week by deciding to keep interest rates at 1.00%. Although the Bank still seems confident in the economy, NAFTA renegotiations are clearly going from bad to worse. In addition, the Bank doesn’t know how badly the economy will react to tougher mortgage regulations either. Accordingly, further interest rate hikes this year or next now seem less likely, in contrast to financial market expectations.
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