03:50 PM EDT, 05/30/2025 (MT Newswires) -- In Canada, the the highlight of the week will be the Bank of Canada's monetary policy update Wednesday.

In what remains a "somewhat uncertain" decision, National Bank expects the central bank to leave its policy rate unchanged at 2.75%. It would be the second consecutive pause (after 225 bps of earlier easing) as the Bank of Canada contends with "acute" uncertainty. National Bank said: "While we judge that economic conditions and the outlook are ripe for a cut, policymakers have said that they can't be forward-looking. For now, core inflation pressures are well above target which leans against the cut signals flashing elsewhere (most notably in the labour market)."

While policymakers may hold off on lowering rates in June, going forward National Bank expects the growth/employment "hit" to become more prominent, while inflation anxieties should moderate. It said that would set up a cut in July as more clarity emerges. National Bank continues to expect the BoC's policy rate to settle at 2% at the end of the year.

Natonal Bank noted that this decision will not be accompanied by an updated Monetary Policy Report. Still, Governor Macklem and Senior Deputy Governor Rogers will hold a press conference after the decision.

The release of the Labour Force Survey will also be closely watched next Friday. After being boosted by last month's federal election, National Bank said public employment may have declined in May. And since the drop was likely only partially offset by gains in the private sector, total employment may have fallen by 15K during the month. Assuming the participation rate fell one tick to 65.2%, the decline in employment could result in a one-tenth increase in the unemployment rate to a post-pandemic high of 7.0%, it added.

National Bank noted we'll also receive data on the merchandise trade balance for April, next Thursday. It said lower energy prices and tariffs imposed by the U.S. administration may have weighed on exports during the month. Consequently, shipments may have decreased for the third consecutive month. Combined with an increase in imports, National Bank added this could result in a larger trade deficit, growing from a negative C$0.51 billion to a negative C$1.51 billion.

Some clues on the state of the private sector in May will be available will the release of S&P Global's

Composite PMI, also on Thursday.

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