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 hints of imminent rate hikes, particularly considering the disruptions to auto and energy production in this second quarter. Later this year we still see the Bank holding its policy rate at 1%. Should it decide to raise rates, however, it is unlikely to raise rates more than once or twice. Slower US economic growth and a Canadian housing correction will dampen economic growth. As such, any proposed tightening campaign is likely to be short-lived, if not regretted.
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