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Tightening bias will be dropped before year end

We expect the Bank of Canada to continue justifying its tightening bias next week on the basis of high household debt. Before year end, however, we expect the Bank to drop talk of rate hikes. The weak global backdrop and potentially severe housing market correction underway will mean sub-par 1% economic growth this year and next, with inflation staying close to the lower bound of the Bank's target range.

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