It is almost a foregone conclusion that the Bank of Canada will hold its policy interest rate at 1% next week. More importantly, we think the Bank will not offer any hint of imminent rate hikes, while possibly placing even more emphasis on renewed aversion to risk in global financial markets. We still see the Bank holding its policy rate at 1% for the rest of this year. Should it decide to raise rates as markets expect, however, it is unlikely to raise rates much more than once or twice before the economy exhibits clearer signs of struggling. As such, any proposed policy tightening campaign is likely to be short-lived, if not regretted.
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