06:19 AM EDT, 10/29/2025 (MT Newswires) -- The Bank of Canada will begin this week's series of four G10 central bank meetings with its policy decision out at 9:45 a.m. ET on Wednesday, said Commerzbank.

Just under two weeks ago, markets began to anticipate another rate cut of 25 basis points, and are now consistently factoring this in with an estimated probability of around 80%.

Several factors give Commerzbank cause for doubt:

-- Firstly, while inflation is still within range, it has recently exceeded expectations. An increase in the headline year-on-year rate was expected, partly due to base effects. Ultimately, however, it was 0.2 percentage point higher than expected, and the core rate also increased. With the current key interest rate standing at 2.5% and the headline rate at 2.4% year-on-year, another interest rate cut would represent a further step into expansionary territory.

-- The labor market has been cooling for several months, but it has also been very volatile recently. Admittedly, BoC Governor Tiff Macklem viewed the surprisingly strong job growth in September as an outlier, a view with which Commerzbank agrees. However, cutting interest rates in a month when both inflation and the labor market exceeded expectations would send a strong dovish signal.

-- Added to this are the new concerns about United States tariffs. On Monday, there was a recent escalation, including a 10 percentage-point increase in U.S. tariffs. Although it is still unclear which goods will be affected, the uncertainties provide another argument for a wait-and-see approach.

Commerzbank pointed out that it generally expects another interest rate cut this year. However, the bank thinks that the December policy meeting would be a more appropriate time for this.

By then, it may be clearer whether the September figures were an outlier and how relations with the U.S. will develop, added Commerzbank. This is a non-consensus view, as almost three-quarters of economists surveyed by Bloomberg expect an interest rate cut on Wednesday.

Nevertheless, if this cut doesn't happen, the Canadian dollar (CAD) could benefit somewhat in the short term, even though the fundamental factors continue to suggest otherwise in the medium term, according to Commerzbank.