08:47 AM EDT, 07/30/2025 (MT Newswires) -- The Bank of Canada is likely to leave interest rates unchanged at 9:45 a.m. ET Wednesday, said Commerzbank.

The key interest rate has now reached the level that policymakers consider to be neutral, wrote the bank in a note to clients. Meanwhile, core inflation remains significantly higher than the headline rate and is hovering around the upper end of the 2%-3% target range.

In addition, the latest labor market report was stronger than expected, which should ease concerns that the BoC will have to deliver further interest rate cuts for the time being, stated Commerzbank.

It will be interesting to see the new forecasts and outlook for the coming months, added the bank. When the last forecasts were published in April, President Donald Trump's so-called 'Liberation Day' was just two weeks away and discussions about a full-blown trade war with the United States were still ongoing.

Since then, the U.S. has concluded deals with several countries, while Canada has recently been threatened with a 10 percentage point increase in tariffs from this Friday.

Although Canadian sentiment indicators have stabilized somewhat recently, this has occurred from a very low starting point. If the BoC emphasizes the risks associated with this trade conflict, the market is likely to anticipate further interest rate cuts in the coming months, according to the bank.

This would weigh on the Canadian dollar (CAD or loonie), noted Commerzbank.