07:18 AM EDT, 03/12/2025 (MT Newswires) -- ING said it expects a 25bps rate cut of the Bank of Canada overnight rate to 2.75% on Wednesday.

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

The 25bps reduction would be a consensus move and markets are fully pricing it in, wrote the bank in a note. All the focus will be on the wording for future moves and, crucially, on hints of the BoC's reaction function to United States trade tariffs.

The BoC already outlined a baseline scenario where U.S. tariffs triggered an initially larger growth impact compared with the inflationary shock. That suggests a dovish BoC reaction and markets are pricing in 75bps of cuts in total -- including Wednesday -- for 2025, stated ING.

While President Donald Trump's 50% metals tariff threat only lasted half a day, recent developments point in the direction of further escalation in the U.S.-Canada trade spat and raises the probability that the BoC will err on the dovish side in its communication to prevent excessive negative repricing in growth expectations. added the bank.

ING has been bullish on USD/CAD and still favors a structural move above 1.45 on the back of U.S. protectionism. The upcoming electoral campaign in Canada will focus on the tariff response, and indications of growing anti-U.S. sentiment means both the Conservatives, which are leading in polls, and the Liberals, now led by Mark Carney, will retain a rather hawkish stance on trade.