It is almost a foregone conclusion that the Bank of Canada will hold its key policy interest rate at 1% next week. More importantly, we think the Bank is unlikely to change its stance on monetary policy at all this year. As such, we think the market consensus for two quarter-point interest rate increases over the next twelve months is too high. We forecast that slowing economic growth and persistent low underlying inflation will keep the Bank on hold, despite a temporary rise in headline inflation from 2% to 3% later this year.
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