07:19 AM EDT, 06/04/2025 (MT Newswires) -- Wednesday's decision by the Bank of Canada promises to be "very exciting," said Commerzbank.

Canada's central bank is scheduled to release its policy statement at 9:45 a.m. ET.

Whether the BoC will cut interest rates again or wait until its next meeting at the end of July isn't a foregone conclusion, wrote the bank in a note to clients. Arguments in favor of another rate cut include the fact that the labor market is in a difficult position, the headline inflation rate has recently fallen back below 2% year-on-year and leading indicators show that Canada is experiencing a more negative effect from the United States trade policy than any other country.

This comes at a time when Canada is already experiencing weak productivity growth.

There are also compelling reasons for a pause, pointed out Commerzbank. Unlike the headline rate, the core rate recently rose back above 3% year-on-year, and the BoC may view this as a more accurate reflection of underlying inflationary pressure.

In addition, the central bank has cut interest rates by 225 basis points in one year and the key interest rate is now close to the expansionary range. As a consequence, policymakers may wish to wait and observe the effects of the rate cuts before making further changes.

With two new inflation figures and labor market reports due before the next decision in late July, the BoC will have a clearer idea of whether further interest rate cuts are necessary.

It is likely to be a close call, with the market still pricing in a residual probability of an interest rate cut on Wednesday, and with the Bloomberg survey recently swinging towards unchanged rates.

Commerzbank also considers unchanged interest rates to be the more likely scenario, but the bank recalls that the BoC is prone to surprises. If it stays put on Wednesday, the Canadian dollar (CAD or loonie) is likely to benefit, even if all eyes will then be on the July policy meeting.