Difficult decisions lie ahead for the Bank of Canada

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 will refrain from offering material hints of imminent rate hikes. In any case, should the Bank decide to raise its rates later this year, it is unlikely to go up more than once or twice. Slower US economic growth and a Canadian housing market correction lie on the road ahead. As such, any proposed tightening campaign is likely to be short-lived, if not regretted.