-- Investors are unlikely to see any change in interest rates from the Bank of Canada at 9:45 a.m. ET on Wednesday, said Commerzbank.
Like many other G10 central banks -- except the Reserve Bank of Australia -- policymakers are likely to prefer waiting to see the ultimate impact of the conflict in the Middle East, stated Commerzbank.
According to the bank, this view is supported by the latest Canadian inflation figures: the March figures were lower than expected, and the core rate has finally stabilized at just over 2% after many months.
There are also several other reasons: The real economy is recovering very slowly; Canada should be somewhat better protected from a price shock due to its energy independence; and, above all, there is the ongoing difficult relationship with the United States and the approaching CUSMA negotiations.
As a consequence, there are few reasons to rush ahead and raise interest rates, wrote the bank in a note to clients. Even if an interest rate hike ultimately becomes necessary due to the Iran war, it's likely that other central banks will react first.
Commerzbank still considers market expectations for the BoC to be significantly more realistic than those for the European Central Bank or the Bank of England. But a Canadian interest rate hike is unlikely to be an issue until the last quarter of the year.
For now, monetary policy is unlikely to play a decisive role in moving the Canadian dollar (CAD or loonie) and the rise in oil prices is likely to take center stage.