Buildings in financial district in downtown Toronto, Canada
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As the Bank of Canada prepares for another rate decision next week, policy makers have an easier decision than their global counterparts, a CIBC report says.

“Markets aren’t clamouring for a move in the near term, and neither, for that matter, are Canada’s political leaders,” wrote CIBC Capital Markets chief economist Avery Shenfeld in a report on Friday. “[Federal Reserve chairman] Jay Powell would no doubt like that sort of quietude.”

Economists expect the central bank to maintain its overnight rate at 1.75% on Wednesday. The C.D. Howe Institute called for a hold next week and through July 2020, with members of the think-tank’s monetary policy council weighing Canada’s “relatively robust” economic performance against a more concerning global outlook.

National Bank Financial’s (NBF) report on Friday pointed to a first half of 2019 that saw almost 250,000 new jobs (the best period since 2002) and wages up an annualized 6.5% (the fastest rate since 2007). Add to that inflation (2.1%) at its highest level since 2012 and signs of an oil sector rebound.

That performance contrasts with economic data elsewhere that has led central bankers to take more dovish positions. While the BoC can emphasize global uncertainties, the NBF report said, “there’s a limit to how dovish it can sound without appearing out of touch with domestic data.”

So, while governor Stephen Poloz may have an easier decision on Wednesday, there’s “a risk that even a balanced approach might sound hawkish to markets in comparison to the dovish turns performed by other central banks lately,” the NBF report said.

CIBC’s Shenfeld raised the same concern about a hawkish tone, while others signalled a policy ease could “send the Canadian dollar on an export-denting tear.”

“Governor Poloz has been of the view that a hike is more likely than a cut when the day comes to act, and the recent pick up in growth, and a marginal uptick in core inflation, may have reinforced that leaning,” he wrote.

However, Shenfeld said a hold is “highly likely” and that there’s no reason for the bank to give a signal next week about where it’s headed.

The BoC will also release its monetary policy report on Wednesday with updated economic projections. NBF expects a “significant” upward revision to the second quarter growth forecast and corresponding adjustment for full-year growth.

Read the CIBC report here, the NBF report here and the C.D. Howe post here.