Bank of Canada maintains neutral bias

Although the Bank of Canada left its policy rate unchanged at 1.0% today and maintained its neutral bias, we suspect that the emphasis on the recent rebound in inflation in the accompanying statement will be interpreted by the markets as a more hawkish shift. We still believe that rates will remain on hold at 1.0% for the foreseeable future, however, with the risk of a cut bigger than the risk that rates might be raised.