The Bank of Canada meeting expects policymakers to raise interest rates by 25 basis points for the last time in this tightening cycle. This will raise the overnight interest rate to 4.5%, and banks will suspend interest rates to assess the impact of multiple rate hikes, including a significant 100 basis point change in interest rates. The market will pay attention to whether this is the final peak of the central bank's interest rate hike, which may be scheduled for the end of this year.

At the meeting in December to raise interest rates by 50 basis points, the bank stated that it would "consider whether further policy rate hikes are needed" as it "continues to evaluate the effectiveness of tightening monetary policy" and "how inflation and inflation expectations are responding". This is seen as a clear sign that the Bank of Canada is very close to slowing down the pace of interest rate hikes. Recently, President McClem pointed out that high inflation means banks need to pay more attention to insufficient tightening. This means that the risk lies in not raising interest rates enough, not raising them too much.

Since December last year, core inflation has remained high, the job market remains strong, and wage increases all indicate the growth momentum at the end of last year. On the other hand, with the weakening of overall inflation, some activities have slowed down. The real estate market is also facing pressure from rising mortgage interest rates. This may mean that aggressive rate hikes that occur in the early stages of the cycle may cause policymakers to pause earlier than widely believed, especially if the bank reiterates its enthusiasm for considering the impact of early loading and whether more rate hikes are needed.

Regarding the Canadian dollar, raising interest rates will not put pressure on it at all, as a 25 basis point rate hike is close to the full pricing of the money market. Similarly, if we see 'dove like' interest rate hikes, accompanied by more cautious language and discussions about peak interest rates, the Canadian dollar may also find it difficult to find any bids. The bank may use flexible language in the future to maintain its options. It is expected that it will not make an immediate commitment, but will rely on economic data to determine the short-term interest rate path.