The Bank of Canada kept its key interest rate at 2.25% on Wednesday, as expected, said Commerzbank.
At the same time, policymakers gave little indication that this might change in the near future, writes the bank in a note to clients.
The BoC sees little sign of widespread price pressures being triggered by the war in the Middle East, a view likely reinforced by the fact that core inflation has continued to ease unexpectedly recently.
The weak real economy, on the other hand, means that a slightly expansionary monetary policy remains appropriate.
Commerzbank stated that, if at all, the BoC's first interest rate hike is unlikely to take place until December 2026. The latest figures, however, now suggest that it might come even later, although there is still plenty of time until then.
Market expectations have shifted in this direction in recent weeks too, with only one rate hike currently priced in by December, pointed out the bank.
Pressure on the Canadian dollar (CAD or loonie) from monetary policy is likely to ease somewhat accordingly, added Commerzbank. With the USMCA negotiations approaching and the real economy weakening, as well as political concerns, there are nevertheless still many problems.
As a consequence, those anticipating lower USD/CAD levels should continue to hope for a weaker US dollar (USD), according to the bank.