09:00 AM EST, 01/29/2025 (MT Newswires) -- The Bank of Canada will hold its first meeting of the year on Wednesday and release the policy statement at 9:45 a.m. ET, noted Commerzbank.

The bank -- as well as financial markets and all the economists surveyed by Bloomberg -- expect that after two big rate cuts of 50bps each, the BoC will slow down the pace of rate cuts and cut the key rate by only 25bps this time.

One argument against another larger cut is that Canada is now approaching the neutral zone, where monetary policy is neither restrictive nor expansionary, stated Commerzbank. The BoC is unlikely to want to go any further for the time being, but will instead wait and see how the 200bps of rate cuts since the beginning of June -- including Wednesday's highly likely cut) -- play out.

In addition, the bank has recently seen tentative signs of hope that the real economy is recovering, and the risk of possible United States tariffs is hanging over everything.

It will be particularly interesting to see what happens after Wednesday's cut. Commerzbank estimated the BoC to indicate quite clearly that it is likely to continue to slow the pace of rate cuts as a rate cut at every meeting is no longer a foregone conclusion.

Rather, the bank thinks it will make one last cut in April and then take a wait-and-see approach. If the BoC makes this clear on Wednesday, the Canadian dollar (CAD or loonie) should recover somewhat, although U.S. President Donald Trump's tariff threats will continue to dominate in the coming days.